By: Formbys Lawyers
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Lending to Family Members
When lending money to family, it is as important to record the terms of an intra-family loan – parents to children – as it is for business arrangements.
A written agreement records the terms and parties to the agreement do not have to rely on fallible human memory. Numerous times I have seen disagreements arising from an arrangement where each party has an honestly held, different recollection of the agreed terms. With a written agreement you have a written record of exactly what was agreed. You can vary it, depart from it, do what you like, but the fundamental arrangement is recorded and is what goes unless the parties agree otherwise.
In Family Court proceedings if the terms are not contained in a written agreement the court will determine what the loan terms are or if it is gift and not a loan at all. Loan agreements can be simple, the parties, the amount of the debt, the interest rate, a first or second charge over property, provide for a caveat to be lodged against the property or a charge registered under the PPS legislation.
If a party dies, becomes bankrupt, their marriage breaks down then there is a document which sets out the terms of the loan. This avoids disputes, ill feeling and litigation and means the best chances of recovering the debt.
A properly drawn loan agreement and charge can give priority in bankruptcy.
Formbys Lawyers has an initial half an hour consultation available for $220.00 inc GST to discuss your situation and requirements, contact our office to arrange an appointment today 08 9354 0300.