It's All In The Planning!

An elderly parent needs to consider various issues before transferring his only house to his child.

THE pursuit of material possessions is a common obsession, and people’s attitude towards ownership of property may change as they get older.

Many, after having seen their children through college, see no reason to hold on to the house they are staying in.

They seem to think that as long as they can be assured of a place in the house, it would save the hassle of applying for a Letter of Administration and going through other formalities, if they were to transfer the said house to their child while they are still around.

While the hassle of transfer may well be avoided by reason of such action, many a parent has found himself unwelcome to stay on as time goes by.

It was pointed out in this column about a month ago that where a parent chooses to transfer the house to his or her child, a measure of protection may be obtained through a formal agreement.

But does an agreement provide absolute protection?

This needs further elaboration.

The agreement

The idea of a parent and child entering into such an agreement may seem somewhat alien in the context of our society. However, it would provide a certain measure of comfort and security for the parent.

The rights of both parties in such a situation would depend on what is stated in the agreement.

In such a case, the express purpose is to provide for the parent a place in the house, in view of the fact that the house has been transferred to the child.

This is because if the house is unconditionally transferred to the child, in law it becomes the property of the child.

At that point in time, it may seem distasteful to talk about the parent’s entitlement to stay. Though the parent may think this is understood, such a belief does not create a legal right.

To create a right for the parent, there must be an express agreement that the parent is entitled to stay in the house for as long as he lives.

This would amount to a lifetime licence. Such an agreement can, of course, be oral but a written agreement is preferable.

What about the payment of quit rent, assessment, utilities and other such charges?

Again this is unlikely to have been expressly stated but could become an issue in due course.

The recipient may not think much of paying all these in the early stages but resentment may set in at a later point in time. Here again, an express agreement will help.

Dangers lurk

However, even a formal agreement may not necessarily protect the parent in terms of continued accommodation. This is because there may be other ways in which the rights of the parent to stay in the house may be affected.

Thus the child who needs money for a variety of reasons may decide to charge the house as security for a loan.

As the house is only used as security for the facility, the parent may feel unaffected because he is able to stay on.

In some cases, the parent may not even know that the house has been used as security. In other cases, the parent may not object to the property being charged. It may appear to be a win-win situation because the house is transferred to the child, the parent can stay there, and at the same time it can be used as security for a loan that the child requires.

However, a problem will arise if the child defaults in the repayment of the bank loan. When this happens and the breach arising out of the loan default cannot be rectified, the house may end up being auctioned to a third party.

In other situations, the child who is desperate for money may, unknown to the parent, enter into a sale and purchase agreement with a third party. The parent may only come to know about it when the new buyer turns up and asks him to vacate the house.

Parent’s option

Considering all these possibilities, it may be an option for the parent to keep his property for as long as he lives. But where a parent decides to do otherwise, there are other safeguards which can be explored.

The parent can lodge a caveat at the appropriate Land Registry, following a formal agreement entered into. This would alert a third party buying the property or giving a loan, as to the lifetime interest of the parent.

The parent can also stipulate that if he is deprived of staying in the house for any reason, then the child will provide alternative accommodation. Payment for all utilities and other expenses could also be expressly provided for.

Even if this is not in the initial agreement, it could be agreed to when steps are taken to charge or sell the house. But the opportunity for this would only arise if there was an express provision for the child to consult the parent before doing so.

Conclusion

Of course, many a parent may find all these rather cumbersome and prefer to hold on to the belief that the child will not turn out to be ungrateful. Such a belief may well be justified. But if it is not, the extent to which a parent may go to court to enforce his rights is another matter.

However, it bears remembering that while gratitude may be in abundance at the point of transfer of the property, such feelings are capable of being diluted by the passage of time. The sense of parental obligation may be affected by other influences and may also be blurred when confronted with other challenges.

At the end of the day, it is a personal decision for the individual involved. Perceptions and beliefs which a person grows up with no doubt plays a role. But any decision made certainly requires an appreciation of changing attitudes and times.

Read BhagSingh’s original story here.

When a parent transfers a house to his child, it does not automatically give the former a right to stay on, on an unlimited basis.

THE problem of children neglecting their elderly parents is nothing new. It was recently highlighted in the newspapers that an elderly patient who was discharged from hospital after undergoing heart treatment, found himself abandoned at a bus-stand.

The man was relieved upon seeing his son the following day, and was looking forward to going home. However, his joy was short-lived when it turned out that the son was only there to hand over his bicycle.

Then there was another case where a daughter abandoned her father at a dialysis centre.

Such incidents are of concern to any parent who is dependant on his child for accommodation. In some cases, the parent may not have any option but to depend on his child to provide for him. However, in other cases, a parent may put himself in a vulnerable position by transferring his only property to his son or daughter while he is still alive.

He may have done so because the property was meant to be transferred to his child eventually. In doing so, the parent may believe that he will be allowed to stay in the house as long as required and perhaps even be financially assisted and cared for. But such a property transfer can have serious consequences.

Effect of transfer

The person who transfers the property is known as transferor, while the person receiving it is referred to as the transferee. The transferee is now the new owner of the property and is vested with legal rights.

When there is a title, the transfer of ownership is effected by registering a document in writing using a prescribed form under the National Land Code. The transferee goes down in the records of the Land Registry as the new owner. Where there is no separate document of title, such transfer process is affected through a Deed of Assignment.

Whatever the mechanism of transfer adopted, the child in such a case would become the legal owner of the property. The father-child relationship with regard to the property in the absence of express provision is of little relevance.

If, thereafter, the child does not allow the father to stay in the house, the father would in the absence of a specific agreement, have no right whatsoever. But how could the father have reserved such a right?

It is open to a son and his father to have agreed that in consideration of the father transferring the house to the son, the father would for the duration of his life, be entitled to stay in the house.

In reality such matters are seldom discussed expressly, what more in writing. The more likely scenario is that the father would, without saying so, expect the child to know his obligations. However, in a legal context, this can cause difficulties.

Testamentary gift

To avoid such a situation, one option would be not to transfer the house to the son immediately but plan it as a testamentary gift. This means the father continues to retain ownership of the house but will give it to his son upon his death by providing for this in his will. This, however, has its own implications. A will can always be changed at any time before the death of the person who makes it. It allows not only changes and modifications to be made as to the directions in the will but also its entire contents revocated.

For a son who expects to inherit the house, a will does not ensure the same security and is not to his absolute advantage. It is not an ideal situation where the son has his eyes on the house. On the other hand, by stipulating the gift in the will, the father continues to have all rights to the property and yet be able to give away the house at the appropriate time.

Yet there are parents who would rather transfer the property outright. The reason is that there could be a problem which a person would like to avoid, if relying on a will. A parent may state his wishes in the will. But the will could be challenged. If and when this happens, there could be protected litigation.

In many cases, the parent may not want a situation which has the potential to create uncertainty. He may want to see the house go to the son without any challenge being made or pursued later. The transfer would enable him to ensure that his plans are carried through. But there are risks. Is there any other option?

A trust

Another way out would be to transfer the property to the son and simultaneously have the son declare that he holds the property in trust for the father.

By this arrangement, the house could be transferred to the son. With the son holding the property in trust for the father, the latter’s rights would be safeguarded.

By this, the son becomes the registered and legal owner. At the same time the father is the beneficiary under the trust during his lifetime.

Such an arrangement would be more difficult to challenge by a third party on the death of the father.

Conclusion

It is hoped that cases of children booting out their parents after inheriting the property, are a rarity. Filial piety continues to be observed in our society.

Nevertheless, with changing attitudes, one cannot be certain that attitudes will not change in time to come.

In some cases, such occurrences may be caused by an individual’s greed or lack of gratitude.

On other occasions, parents get chased out because the child may be faced with a dilemma: he has to decide between spousal objection and fulfilling parental obligations. Once he has made the decision, he will have to live with the choice of a damaged relationship with the spouse or with the life-long thought of having betrayed the parent.

Read BhagSingh’s original story here.