There’s no place like home – the inherent risks of gifting property.

Most people view acquiring and owning their own property as a significant life event. From a first-time buyer taking their first steps on the property ladder, to a couple looking to downsize to a more manageable property – owning the “roof over your head” often marks the end of a considerable period of financial planning and management.

There is an increasing trend for people to consider transferring ownership of their home to other persons, for a variety of reasons. When done properly, and with the benefit of appropriate advice, transferring assets (including property) to a third party can be beneficial from a personal tax planning position; it can contribute to the new owners’ personal financial position; and ensure that the assets in question pass to loved ones smoothly and efficiently.

However, transferring ownership of property to a third party - even a trusted loved one - should never be undertaken lightly. Once a property owner parts with the legal title to that property, they lose determinative control as to how that asset will be used, meaning that the new owner can sell, mortgage, or otherwise deal with the property - with little or no thought as to the needs of the original owner.

When considering the transfer of a property to a family member, many people dismiss these risks, presuming that their “nearest and dearest” will always have their best interests at heart. In many situations, this may well be the case – but what happens if this relationship breaks down? What protections are afforded once the property has been transferred?

This issue recently came under the spotlight in the case of a Ms Norma Gibbons. In 2004, Ms Gibbons transferred ownership of her share in a London apartment, valued at £1.4 million, to her daughter Dawn, ostensibly for tax planning reasons. At the time of the transfer, the relationship between mother and daughter was seemingly good.

However, tensions between the pair (who lived in adjoining apartments within the property) began to sour, following the birth of Dawn’s child in 2008. This breakdown in relations worsened over the ensuing years, sparking a pattern of what was described to the Court as “multiple harassment issues”. Over the ensuing years, Ms Gibbons recorded upwards of 150 calls to the police making various untrue allegations about her daughter; creating deliberate leaks from the upstairs flat (in which Ms Gibbons lived) into Dawn’s downstairs property; and refusing access to the workmen who came to repair the damage.

This damaging behaviour culminated in a series of court cases, ending with Ms Gibbons, the initial owner of the property, being forcibly evicted by order of the Court. The trial judge rejected Ms Gibbons claims that, in giving the property to her daughter, she expected that she would be entitled to live there for the rest of her life. The deed that Ms Gibbons signed to transfer the property contained no such provision, and therefore from the date of transfer she lost all legal rights to reside in the property. What began as a voluntary transfer of her property as part of a tax planning exercise, ended in Ms Gibbons losing the right to reside in her home.

Whilst few people would expect relations with their loved ones to change in such a dramatic fashion, one can never know what the future holds. The transfer of property to a trusted third party may be a sound tax and estate planning tool – however, it should only ever be undertaken following genuine consideration of the risks inherent with such a transfer, and in conjunction with sound legal advice.

Carson McDowell’s Private Client team can assist in advising on the implications of a proposed property transfer, and the impact that this can have on your personal legal affairs. We work closely with other professionals to ensure that our clients remain fully advised as to the implications that any such decisions may occasion.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.