A Declaration of Trust, also known as a Deed of Trust, is a legally-binding document that records the financial arrangements between joint owners of a property, and/or anyone else who a financial interest in the property.
You make this agreement at the time of buying the property. Then should certain circumstances arise in the future – for example, the property is sold or one person wants to be bought out – you’ll know exactly who is entitled to receive what.
The purpose of a Declaration of Trust is to remove any uncertainty as to what will happen to each person’s money. Setting out the financial arrangements between you at the outset will provide clarity, hopefully reducing any disagreements in the future.
A Declaration of Trust (Deed of Trust) is a legally binding agreement, so those involved must honour the terms.
Who Should Get a Declaration of Trust?
A Declaration of Trust is useful for anyone who is buying a property with someone else as joint owners, or who is buying a property with the help of someone else.
Buying Property as Joint Owners
When you buy a property with someone else, it’s possible that you won’t be dividing the costs 50/50. One of you might be putting more towards the deposit, or one of you might be paying more towards the mortgage repayments.
Whether you’re buying a property as Tenants in Common or Joint Tenants, a Declaration of Trust allows you to set out how much money each person is putting in and how much money each person should receive when the property is sold, or when one person is bought out by the other.
Buying Property with the Help of Someone Else
These days it’s common for people to receive financial help from family members and friends when buying a property. In most cases the people providing financial assistance will want their money back, even when the money comes from the bank of mum and dad.
A Declaration of Trust, or Deed of Trust, can specify how much money should be repaid, and in what circumstances this money should be repaid. This will protect that person’s investment, helping to ensure it isn’t lost.
What can a Declaration of Trust include?
What’s included in a Declaration of Trust will depend on your individual circumstances. It can include:
- How much each person contributes to the deposit, and how much will be repaid
- What percentage of the property each person will own, and how the money will be split should the property be sold
- How much each person will pay towards the mortgage, and how the mortgage will be paid off
So if you’ve bought a property with a partner, you might want a Declaration of Trust that says if you were to split then you’d both get your deposits back (which might be different amounts) and the equity would be divided equally between you.
Or if you’ve bought a property with your partner after your parents lent you £25,000 for the deposit, you might want a Declaration of Trust that says if you split up, your parents will get their £25,000 back before the equity is divided.
It’s up to you what you want to include in your Declaration of Trust, but ultimately it’s there to help protect each person’s financial interest.
Our Family Law Solicitors can advise you on what to include in a Declaration of Trust, ensuring everyone’s investment is protected.
For free initial legal advice call our Family Law Solicitors on 03306069626 or contact us online and we will call you.