A Declaration of Trust is a legal document that records the financial and other arrangements between joint property owners, as well as anyone else who may have a financial interest in a property. They are made at the time of purchase of a property and once this document is in place and signed, both (all) parties will know where they stand in the future if the property is sold or if someone wants to buy the other party out of the property in the future.
The Declaration of Trust is put in place to remove any uncertainty around the financial input into a property from each person and, by outlining these at the very start of the property journey, helps to provide clarity and reduce any potential disagreements in the future if the house is to be sold.
A Declaration of Trust is a legally-binding agreement. Therefore, those involved must honour the terms of the trust.
Who should get a Declaration of Trust?
A Declaration of Trust can be useful for anyone who is purchasing a property with someone else as joint owners. A Declaration of Trust may also be drawn up if someone is buying property with financial help from someone else – for example if parents are supporting their child with a deposit for a house, and want the deposit money back if the property was to be sold in the future.
Careful consideration needs to be given, where money is being given by parents and family members and a mortgage is involved. Lenders will usually ask for any rights and interest in the property to be waived by anyone giving a gift of money, so a declaration of trust would not then be able to protect that gift.
Buying property as joint owners
Nowadays, it is very common for people to buy houses with their partner before they get married, or even to buy houses with siblings or friends as the cost of buying property has risen. In these cases, it’s often likely that costs won’t be split exactly in half. One party may be paying more towards the mortgage or one may put up more money for the property deposit.
A Declaration of Trust lets you set out the financial contributions of each person and, therefore, what each person should receive if the property is to be sold in the future. This can help futureproof financial investment for each party.
Buying property with the help of someone else
As previously mentioned, it’s common for people to get financial help from family members when it comes to purchasing a property. In some cases, the person who is providing financial help will likely want their money back at some point in the future, and a Declaration of Trust can help ensure this amount is specified and under what circumstances the money should be repaid to the contributor. This helps ensure the money is protected and not lost in future transactions. This will only be in cases where there is no mortgage lender involved, unless the mortgage provider has agreed to this prior to the purchase of the property.
What can a Declaration of Trust include?
This is largely dependent on each individual situation and can change largely from case to case. A Declaration of Trust can include:
- What percentage of the property each person will own, and how the money will be split if the property is sold.
- How much each person contributes to the deposit and how much money will be repaid to them if or when the property is sold.
- How much each person will pay towards the mortgage and how the mortgage will ultimately be paid off.
Ultimately, it’s up to the purchasers what to include in a Declaration of Trust and its main purpose is to protect the financial interests of all parties when it comes to selling the property in the future.
Our expert and trusted solicitors can support and advise you on what to include in a Declaration of Trust in order to make potential difficult situations in the future easier. Buying property, under whatever circumstances, is an exciting experience and we can help keep the process enjoyable and as smooth as possible. Get in touch today to learn more about buying property together or to discuss your needs for a Declaration of Trust.
Our team can also help with Declarations of Trust for care home fee planning, estate planning or providing for loved ones. If you would like further advice please contact a member of our Trusts and Probate department today for advice:Contact us