What Is A Declaration of Trust

A Declaration of Trust, also known as a Trust Deed (Deed of Trust), specifies how joint owners hold a property. It sets out the financial arrangements between two or more people buying a property together, helping you avoid disputes and protecting your interest in the property. This document can save you a lot of stress and costs in the future.

A Declaration of Trust confirms the specific proportions/shares each owner holds in the property. Properties can be held in joint names but with different individual proportions. This is particularly useful if you each have contributed differently towards the purchase price. This document helps determine the division of the net proceeds when the property is sold, ensuring each joint owner receives a fair proportion of what they invested.

Since purchasing a property is one of the largest personal investments you'll make, it's crucial to protect your interests. A Declaration of Trust states the nature of your ownership and details each party's contributions to the deposit, purchase price, mortgage repayments, and household bills/repairs.

Declarations of Trust are legally binding and enforceable in court if necessary. They contain much more information than the title registered at HM Land Registry and can determine the true ownership of the property and the individual shares each party owns.

This document is most commonly used when a property is held as Tenants in Common but can also be used if held as Joint Tenants.

Types of Joint Property Ownership

1. Joint Tenants:
   • If one owner dies, the property automatically passes to the surviving owner, regardless of the deceased's will or the intestacy rules if no will exists.
   • When sold, the net proceeds are divided equally, regardless of each owner's original or subsequent contributions.
2. Tenants in Common:
   • Each owner has a specified share, which can be bequeathed through a will.
   • A Declaration of Trust can specify how the proceeds are divided based on original contributions, ensuring each party receives a fair share.
   • If not specified by deed, the net proceeds will be deemed to be held in equal shares, i.e., 50% each.

Example Scenario

Imagine you and your partner buy a property together. One of you might have received a significant financial gift from family and contributed more to the deposit. The other may earn more and thus pays a larger share of the mortgage and bills. A Declaration of Trust would:

• Acknowledge the different initial contributions.
• Detail how these contributions should be reimbursed upon sale.
• Specify how the remaining equity should be divided, reflecting both the initial contributions and ongoing payments.

Customising the Declaration of Trust

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

• Confirm who paid what towards the purchase price, including legal fees and stamp duty.
• State that initial contributions are to be returned to the respective owner upon sale. The remaining proceeds would then be divided according to agreed terms.
• Outline how the property is to be valued and the conditions under which it can be sold or one party can buy out the other.
• Specify how much each party will contribute towards mortgage payments, utility bills, and maintenance costs.
• Confirm who owns the contents of the property.
• Include provisions for handling the property in the event of a separation, including options for buying out the other party.

By clearly detailing the financial arrangements and ownership proportions, a Declaration of Trust helps safeguard your investment and ensures a fair division of the property's value.

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