Lending Money to a Loved One? See a Lawyer First!

Money often changes hands between life partners on the basis of trust – but one case in which a woman was left holding nothing but a disputed IOU in respect of £175,000 she claimed to have lent her husband showed how important it is to keep proper records and seek formal legal advice.

Following the end of the marriage, the woman claimed that she had lent the sum to her husband to pay for repair and renovation of a property into which he and his new partner had subsequently moved. She said that he had promised to repay her, with interest, on the sale of the property. However, he denied that she had made any financial contribution to the works or that he owed her anything.

The woman claimed that a bag in which she kept receipts and further evidence of the loan had gone missing. She relied upon the IOU as proof of the debt, but her ex-husband denied that he had signed it, or even seen it before she registered a restriction against the property, preventing its sale without prior notification to her.

In ruling on the dispute, the First-tier Tribunal (FTT) found that there had been a loan, although the terms on which it was made and the amount involved remained uncertain. In overturning the restriction, it found that the woman’s purely monetary claim could not give rise to a proprietary interest in the property.

The FTT noted that the correct legal route for the woman to follow was to obtain a County Court charging order – effectively a mortgage – against the property, which could then be registered. It expressed regret that, unless a negotiated settlement could be reached, further proceedings might be necessary.