What is a declaration of trust?
Also known as a deed of trust, a declaration of trust is a legally binding agreement that sets out the shares between joint owners of a property, as well as anyone else with a financial interest in the property.
Declaration of trust agreements
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What is a declaration of trust?
Increasingly, people are grouping together with partners, friends and family members to buy properties together. Sometimes this will be done on a 50/50 basis, with both of you contributing equally to the deposit and mortgage and owning the property as joint tenants. Alternatively, two or more of you will divide the costs differently and be named on the title deeds as tenants in common.
If you aren't or in a , it will generally be a good idea to make a declaration of trust, which specifies exactly what share of the equity you are entitled to if the property is sold or should one party buy the other out.
What does a declaration of trust include?
The main points set out in a declaration of trust will be:
• To detail the amounts that you are contributing towards the purchase price of the property.
• How will the mortgage be repaid each month if it is in different shares.
• The share you will each have in the property as a result of the amount you have contributed.
Naturally, these are complex matters, and it's also important to understand that a declaration of trust or deed of trust is a legally binding document and should always be prepared by an experienced lawyer, to ensure that everyone receives the protection they are entitled to.
Is a declaration of trust just for property owners?
No. In this age of high property prices, many people go to the 'Bank of Mum and Dad' for a loan when they need a deposit. So even if there are two or more of you buying a property together, it may be that just one of you is putting the deposit down, perhaps courtesy of a loan from your parents.
Naturally, it's fair that the parents, or whoever else has a financial interest in the property, get their money back when the property is sold, or at least that their child gets the money back – or whatever that proportion of the equity is currently worth. A declaration of trust can ensure that everyone receives their rightful financial share.
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