What is a Declaration of Trust and do I need one?
Friday 21st January 2022
A Declaration of Trust is something you may want to consider when purchasing a property with someone else, or when purchasing a property on your own but with the financial assistance of someone else. A Declaration of Trust (sometimes referred to as a Deed of Trust) is a legally binding document that can set out who owns what shares in the property and details the financial arrangements between individuals who have bought a property jointly.
Declarations of Trust are becoming increasingly more popular in a world where property prices are rising dramatically and more buyers are relying on financial contributions from parents for the deposit. In addition, it is now very common for unmarried couples to purchase a property together and provide unequal amounts to the deposit.
The purpose of a Declaration of Trust is to protect each purchaser’s financial investment and help avoid any disagreements or misunderstandings between the parties should the property need to be sold and the sale proceeds divided.
The most common example we come across is where two individuals are buying a property together but only one individual is providing the deposit. In the event of a sale of the property or a relationship breakdown that individual wants certainty that they will receive their deposit back, rather than splitting it with their joint owner. A Declaration of Trust would state that the person contributing the deposit will receive this deposit back in priority (provided there is sufficient equity in the house to repay the deposit in full) and thereafter, any surplus equity is divided between the two owners in such percentages as agreed in the document.
There are many other terms that can be incorporated into a Declaration of Trust, for example, contributions to property renovations may be paid for by just one of the owners, one of the owners may be overpaying on the mortgage, or only one person’s name may be on the mortgage but in reality it is being paid for by both individuals. All of these scenarios can be incorporated into a Declaration of Trust.
As every situation is different, the Declaration of Trust can be tailored to your requirements. If you are purchasing a property jointly with someone else and would like to discuss your own personal situation, get in touch with one of the private client specialists today.
