Article by Manny Wood published in the Coffs Coast News Of The Area on 16 June 2023.
John finds an investment property for sale for $300,000. He discusses the purchase of the property with his 18-year-old daughter, Natalie, who as a first home buyer, is eligible for a Stamp Duty exemption. John offers to give Natalie $75,000 towards the purchase of the property and to pay $1,400 per month to cover the loan repayments.
Natalie agrees and the property is purchased in her name. John pays the sum of $75,000 which is secured by way of a Mortgage. The rest of the purchase price is loaned from a bank.
Over the years, John continues to pay $1,400 a month into Natalie’s bank account, which she applies towards the bank loan. John also pays for renovations to the property, although most of the renovations are done for ‘mates rates’ by John’s friends.
Ten years after the property was purchased, John seeks to sell the property. Given that John paid 25% of the purchase price, he argues that Natalie holds 25% of the property on “resulting trust” for him and that the remainder property is held on “constructive trust” for him, because he paid for the mortgage repayments and because it was “the common intention of the parties”.
Natalie agrees that John is entitled to be repaid the $75,000 that was secured by Mortgage, but argues, because John is her father, the “presumption of advancement” applies, meaning that the property, the improvements to the property and the $1,400 a month payments were gifts.
The Court states that where gifts are advanced to a child, it cannot be said that the child holds those gifts on trust for a parent unless there is sufficient evidence that the parties expressly intended to create a trust.
The Court ultimately rules that John is only entitled to repayment of his $75,000 loan.
Thank you to Jamie Visco for his assistance with this column. Email Manny Wood, Principal Solicitor of TB Law at manny@tblaw.net.au or call him on (02) 66 487 487. This column is only accurate at today’s date and cannot be relied upon as legal advice.