Declaration of Trust/ Trust Deed

What is a Declaration of Trust?

A Declaration of Trust, also known as a Trust Deed (Deed of Trust) is a legal document used to specify how a property is held between joint owners. It sets out the financial arrangements between two or more people buying a property jointly. It helps prevent disputes, protect your property interests, and save stress and costs in the future.

Confirming Ownership Proportions

A Declaration of Trust confirms the specific proportions/shares in which owners hold their property.  Properties can be held in joint names but with different individual proportions. This is particularly useful if there have been differing contributions towards the purchase price by each party.  A Declaration of Trust will help determine the division of the net proceeds of sale when the property is sold. It also prevents disputes over ownership, ensuring each joint owner gets a fair share of their investment when the property is sold.

Protecting Your Investment

Buying property is a major investment, so protecting your interests is essential.  A Declaration of Trust defines your ownership. It details each party's contributions to the deposit, purchase price, mortgage, and bills.

Legally Binding and Enforceable

Declarations of Trust are legally binding and can be enforced in Courts if necessary.  It contains far more information to that in the title registered at HM Land Registry and can be used to determine the true ownership of the property and individual shares each party owns.

Common Usage of a Declaration of Trust

A Declaration of Trust is most commonly used when a property is held as Tenants in Common but can also be used if a property is held as Joint Tenants.

Joint Tenants vs. Tenants in Common

There are two capacities in which the Property can be held jointly:

First, as joint tenants which means that in the event of the death of either of you, the Property automatically passes into the sole name of the survivor, irrespective of the deceased's will or the intestacy rules if no will exists.

Secondly, as tenants in common whereby you each have a specified share in the Property and on death, the deceased's share passes in accordance with the will or the intestacy rules.

Dividing the Proceeds of Sale

If the property is held as joint tenants then when you come to sell, the net proceeds of sale will be divided equally between you, irrespective of your original, or subsequent, contributions towards the purchase price. However, if you hold as tenants in common a deed can be prepared specifying the shares in the net proceeds of sale to which you are entitled.  The specified shares will be based on your original contributions towards the purchase price. It is then for you both to make wills to ensure that in the event of death, the deceased's share passes in accordance with express wishes. If you do not specify by deed, the shares to which you are each entitled, then the net proceeds of sale will be deemed to be held in equal shares i.e. 50% each.

EG  You buy a property with your partner, one party may have more savings than the other and one party receives a gift from family, but one may earn more and therefore able to contribute more towards the mortgage repayments, utility bills etc. You may want to ensure that the owner contributing more savings or gifts receive their contribution back if you and your partner separate, and the owner earning more and contributing more is also reflected  in the division of net proceeds on sale

Customising the Declaration of Trust

You can design the Declaration of Trust to suit your personal needs and circumstances. For example:

• It can contain confirmation of who paid what towards the purchase price including conveyancing costs, stamp duty etc
• It can contain confirmation that the respective contributions are to be returned to the respective owner upon completion of the sale and how the balance net proceeds of sale are to be divided
• It can contain confirmation as to how the property is valued if you sell or if there is a dispute in this regard
• It can contain details of how much each party has agreed to contribute towards mortgage repayments, utility bills, maintenance costs etc
• It can contain confirmation as to who owns the furniture
• It can contain an option on separation for each owner to have the option of buying the other owner out before considering selling the property

Contact Us for More Information

For further information in this regard please contact our Residential Property Team on 01256 320555 or email us at mail@clarkeandson.co.uk