Declaration of Trust / Deed of Trust
When two or more people own a property together they need to consider how they want to hold it. A Declaration of Trust is a legally binding document which sets out the framework for how the owners hold the Property.
A deed of trust (as some call it) or a declaration of trust can be simple document or something a little more comprehensive, depending on what matters to the owners.
I am purchasing a property with unequal shares?
It is becoming more and more common in the current market for people to jointly own a property. With the rise in jointly owned property in recent years, we are now seeing a rise in declaration of trust disputes due to a lack of documented input at the time of purchase. More often than not a declaration of trust is a simple procedure, but it will ensure your share of the property is fully protected, which will mitigate any future disputes.
If you require any further information we will provide you with the necessary assistance alongside your purchase, to ensure the appropriate documentation is put in place for you. We have extensive experience in drafting declarations of trust, however complex, which will alleviate the pressure from you during the stressful time of purchasing your property, but most importantly it will help protect you in the event of anything going wrong further down the line.
What do i include in a Declaration of Trust document?
A simple Declaration of Trust may just specify what percentage share each owner holds. A more complex Declaration of Trust can include many points including the following by way of example:
- Who will pay what towards the mortgage and bills?
- What will happen if one owner wants to sell the property but the other does not?
- What would happen if the property is in negative equity when it is sold?
- Who will pay for repairs and upkeep of the property?
- How the income would be split if the property is rented out?
Beneficial Owner of a property
Having a Declaration of Trust in place can help avoid disputes where someone has made a financial contribution to a property which was not a loan or a gift to the owners. This is because that contribution may make them a ‘Beneficial Owner’ of the property. This can be considerably complicated to work out who is entitled to what should a property be sold.
Examples of individuals who may have contributed to the costs of the Property but who are not registered as an owner at the Land Registry include:
- A person who has contributed a lump sum towards the deposit such as the legal owner’s parents;
- The legal owner’s partner who now contributes towards the mortgage and upkeep of the property but is not named as an owner on the title;
- Someone who has added value to the property even if they are not an owner, such as the adult child of the legal owner who paid for the extension to be built in which they now live.
All of the above circumstances have individuals who have contributed to the value of the property even though they are not a legal owner as specified on the Land Registry title of the property. However, they are entitled to a share of the equity of the property even though they are not named on the title. These people are known as ‘Beneficial Owners’. If you are a Beneficial Owner but not a legal owner you may find it difficult to prove how much you are entitled to if the legal owner refuses to acknowledge that you have contributed towards the value of the property.
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