Declaration Of Trust Explained

A Declaration of Trust is a legal document that is used when two or more parties buy a property together. The agreement sets out each person’s share, and details what should happen in the event the property is sold or a relationship breaks down.

What is a Declaration of Trust?

A Declaration of Trust is a legally binding agreement which is drawn up by the legal owners of a property. It is used to confirm:

• The deposit each person has paid
• What share of the property each person owns
• How much each of the parties will contribute towards the mortgage repayments
• How much each of the parties will contribute to fees, maintenance and other costs
• How certain issues should be resolved, should they arise – for example, whether one party will buy out the other

Many other terms and clauses can be included in relation to how a property can be valued and how to force the sale.

Why get a Declaration of Trust?

Parties very sensibly draw up a Declaration of Trust when they purchase a house in unequal shares to avoid any unpleasantness in the future. While you might be on the same page now, there may come a time when one person’s priorities change. This might happen if one person wants to sell or a relationship breaks down. Disputes may also arise regarding the financial interests of each party, especially if one person has contributed more towards the deposit, mortgage or renovations.

Who is a Declaration of Trust for?

If you are buying a property with someone else, you may want to consider drafting a Declaration of Trust to protect your money in the property. Whether you are a first-time buyer, current homeowner or looking to re-mortgage your home, please consider whether a Declaration of Trust is appropriate.

A Declaration of Trust is typically taken out by couples, but it can also be used by family members or friends who are buying a property together. More and more parents are assisting their children when purchasing a property with a boyfriend/girlfriend and not protecting their interests in the property. A Declaration of Trust ensures each party gets their fair share back should the relationship break down. This can prove incredibly useful in the unfortunate event of a breakup or dispute.

Will a Declaration of Trust work?

As a legally binding document, a Declaration of Trust cannot be ignored.

The great thing about a Declaration of Trust is that it is very flexible, because it can be written according to your own circumstances. A solicitor can draft the contract, which all parties need to sign. If you want the changes to be recorded on the Title Deed, your lawyer will organise this with the Land Registry afterwards.

What happens if I don’t get a Declaration of Trust?

After a separation, many parties attempt to communicate with one another to no avail. Negotiations can continue for months, yet one party may choose to ignore the other, or it may simply be impossible to reach a mutually agreeable conclusion. Ultimately, if you cannot agree, you will require a solicitor.

Currently, we are warning all clients to be mindful of the time spent negotiating. This is obviously delaying the sale of properties, when many may benefit from the Stamp Duty Land Tax (SDLT) holiday which means home owners will not have to pay SDLT when re-purchasing homes worth up to £500,000.

Speak to our shared ownership solicitors

Our solicitors can recommend whether a Declaration of Trust is appropriate in your situation, or whether a Cohabitation Agreement is more suitable for your needs.  We can then draft the agreement on your behalf, ensuring your interests are protected.

Please do not hesitate to contact us should you require any further advice.