Declarations of Trust Explained
13th June 2024 by John Munro
If you have an interest in a property but your name is not on the title deeds, a declaration of trust can offer protection. We look at how a declaration of trust works and what provisions you can include to ensure you do not lose any contributions you have made.
It is sometimes the case that individuals contribute towards a property but do not necessarily have their name on the title deeds. This can cause problems if the property is sold or if they wish to realise their share.
When is a declaration of trust needed?
Examples of when an interest in property might arise without an individual’s name being on the title include:
- When an individual moves in with someone, then helps to pay the mortgage, pays the bills so that the other party can pay the mortgage or pays for substantial property improvements
- When a parent provides money to help their child purchase their home
- When a couple buy a property and contribute different amounts
Putting a declaration of trust in place will mean that the financial interest of the person who has made the contributions is documented, so that they can be sure of recovering the money in the future, for example, when the property is sold.
What is a declaration of trust?
A declaration of trust is a legally binding statement or deed that sets out who has a beneficial interest in a property and what each person’s share is.
Owning a property as tenants in common
If you are buying a property jointly with someone else, you can own it in two different ways:
- Joint tenants; or
- Tenants in common
Owning a property as joint tenants means that neither of you holds a specific share. When the property is sold, you would usually divide the sale proceeds equally between you. Should one of you die, the other would automatically own the whole property.
If you own a property as tenants in common then each of you will own a specified share. For example, you could own three-quarters while the other owner owns one-quarter. Ideally, this arrangement will be set out in writing in a declaration of trust or a more detailed deed of trust.
You will be entitled to this share of the sale proceeds if you decide to sell. Should one of you die, then their share of the property will pass under the terms of their Will or, if they have not got a Will, under the rules of intestacy. This means that the other owner will not automatically own the whole property, so it is crucial to put a Will in place leaving it to them if you want this to happen.
Protecting individuals who are not named on the title deeds
A declaration of trust can also be used to document the interest of someone whose name is not on the title deeds. This could be someone who was not eligible for the mortgage, so who is not a joint legal owner, or a parent who has contributed towards the purchase.
A property solicitor can draft a deed of trust that protect their investment. The document can include the following:
- The amount that has been contributed
- The share each party owns
- How mortgage payments and other outgoings will be dealt with
- How a property valuation will be agreed upon
- How sale proceeds will be shared
The document can be tailored to your exact circumstances. For example, if one person paid the deposit, but the other joint owner is paying most of the mortgage, then over time the share of the person paying the mortgage can be set to increase.
Before entering into a declaration of trust, it is important to speak to an experienced trusts and property solicitor, as you need to ensure your interests are adequately protected and make sure that you fully understand any tax and other implications.
Contact us
If you need any further advice on declarations of trust or other property matters please contact Kelly Howe on k.howe@laceyssolicitors.co.uk or 01202 377800.
John Munro
Partner — Commercial and Residential Property
Direct dial: 01202 377839
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“John Munro was friendly and very approachable, advising me with a clear depth of knowledge and experience. I have since recommended him and will do so if asked in the future.”
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“Having dealt with Laceys on many a sale and purchase I’ve always found them to be efficient, knowledgeable and attentive. I wouldn’t hesitate in recommending them to family, friends and clients.”
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“We have always been very happy with the service provided by Laceys Solicitors, in both our business legal requirements and domestic property conveyancing.”
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“You are our solicitor Superhero! Very grateful. ”
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“Changing solicitors is not to be undertaken lightly. However really impressed with the way that John Munro and his associates have dealt with us over the last couple of years in a variety of complex property related transactions and on the commercial and personal front as well. We look forward to working with them going forward.”
John joined Laceys in 2001 on a training contract, having completed a Post Graduate Diploma in Law in 2000, and qualified as a solicitor in 2003. He is now the Head of the Commercial and Residential Property Departments.
He is also the firm’s Senior Responsible Officer under the Law Society Conveyancing Quality Scheme (CQS) with overall responsibility for the management of the property team and their delivery of the excellent service that our clients have come to expect.
John acts in his own capacity for a number of commercial property owners, developers and investors, but also allocates time to ensure his team are up to speed with changing law and professional regulations and clients are provided with members of the team who possess the right skills to deal with their individual requirements, delivering projects in the most time and cost-efficient manner.
Outside of work John seems to spend a great deal of time ferrying his children around but occasionally gets to put his feet up and listen to his eclectic collection of vinyl. He is also not averse to a good cheeseboard and a glass of IPA.
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