Declaration Of Trust

Declaration of trust

This page was last updated on 1 April 2021

Declaration Of Trust In 2021

Purchasing property is one of the largest and most personally significant investments you will make in your life. Therefore, it is especially important to safeguard your interests, and the interests of everyone else putting money in. A declaration of trust can help you set out the nature of your ownership and what contributions each party made to the deposit or mortgage payments. This can save stress and cost later.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

What is a declaration of trust?

This is a legal document which sets out the financial arrangements between two people buying a property jointly, and those with an interest in a property. 

Why do I need a declaration of trust?

Buying property is very expensive so you want certainty around the investment you are making. Also, you can avoid disputes with the person you are buying with in the future, because you already have a plan in place for if one person wants to sell their share or the property is sold.

Is a declaration of trust legally binding in the UK?

Trust deeds are legally binding, so it can be enforced in court. A declaration of trust goes above what is said in a title deed on the land registry. Therefore, it can be used to determine the true ownership of the house, and what proportion each individual party owns. 

What if I do not have a trust declaration in place?

If you can agree on the proportions you each get if the property is sold, then there is no issue. However, if there is any disagreement, the courts can look at the evidence and determine each of the owner’s interest in the property. This can be uncertain, expensive and cost a lot of money. 

Here is a useful video explaining more about these types of trusts

What is a trust deed?

This is a legal document stating the property ownership arrangements in your terms. This may vary from what is on the land registry. The trust can be noted down on the registry too, to cement the relationship and make sure it can be enforced. 

What can I put into my trust deed?

You can craft your legal document to suit your needs. This can include:

  • Confirmation of who paid how much towards the deposit, including stamp duty and conveyancing costs.
  • What share each party owns, and how this will translate if the property is sold later. The percentage can be fixed or vary over time.
  • If someone else contributed to the purchase price, and what they expect to get back.
  • How you will get the property valued if you sell.
  • How much each party is expected to contribute to any mortgage repayments or bills, including utilities and council tax. A possible adjustment mechanism if one person pays for everything for a period of time.
  • Any indemnity on party has to the other person if only one party secured the mortgage.
  • How much each party should put towards the deposit, and how they will get this back.
  • Who will get the rental income if you let out the property.
  • Who owns the furniture.
  • Who is a trustee and what are the responsibilities of each trustee.

For example, if you buy a property with a boyfriend or girlfriend, you may have more savings from your parents, but they may earn more so be able to contribute more to the mortgage. 

You want to make sure your parents get back the contribution they made, even if you and your partner split up, but your partner wants to make sure the fact that they contribute more to the mortgage is reflected if you sell the property. 

Who should consider a trust deed?

There are two categories of people that trust deeds are especially important for; those buying property jointly (as tenants in common or joint tenants), and those who are buying property and getting financial assistance from someone else, like their parents.

Why are trust deeds a good idea for joint owners?

The way money is put into buying a property might not be clear cut, as one owner may pay more of the deposit, and another owner might make a bigger contribution to the mortgage repayments. 

Both joint tenants and tenants in common can use a declaration of trust deed to lay out how much each person should contribute and the arrangements for if you want to sell the property.

Does a declaration of trust affect mortgage? 

Trust deeds are only between the parties. Your obligations to your mortgage lender are still joint, even if you have very different shares in the ownership of the property. 

"Trust deeds are legally binding, so it can be enforced in court. A declaration of trust goes above what is said in a title deed on the land registry. Therefore, it can be used to determine the true ownership of the house, and what proportion each individual party owns. "

Why are trust deeds important when buying property with help from someone else?

If family or friends are contributing, they probably want you to pay them back at some point in the future. You can use a property deed of trust to set out the amount you need to pay them back and when this should be paid. 

Family and friends are likely to feel more comfortable making this investment knowing it is not going to be lost. Their interest can be set out as an interest in the title deeds.

declaration of trust joint tenants

How can a property be jointly owned?

There are two ways two people can be the owner of a property; as a joint tenant and a tenant in common.

Joint tenancy is where you both own the whole property together. If one person dies, their share will be passed on to a survivor.

A tenancy in common is where each person is the full owner of a proportion of the property. The shares do not have to be the same size, and the benefit is that you can leave your share however you want in your will. 

Should cohabiting couples get a declaration of trust for property?

In the UK, there is no such thing as a common law marriage, and so the natural give and take of a relationship can end in one person being short-changed. You should set out your rights and expectations early to protect your interests and finances. 

What happens if only one of our names is on the mortgage?

If you move in with someone, and they are the owner of the house, only their name will be on the mortgage, even if you contribute to the mortgage or other household costs. These contributions could give you a beneficial interest by law. However, it is best to get a declaration of a trust to solidify your relationship and protect your rights. 

At what stage should I get a declaration of trust?

You should try to get a deed of trust on property when you complete the purchase on the property. You can register it as a restriction on the land registry too. 

declaration of trust for property

What is the difference between a declaration of trust and a trust deed?

There is not a difference, the terms trust deed and declaration of trust are used similarly by different solicitors. 

Is a declaration of trust the same as a trust agreement?

Different solicitors use different terms. A declaration of trust is different to a cohabitation agreement, which sets out the arrangements for if two people living together break up. Cohabitation agreements are contractual. 

In comparison, a declaration of trust exists in equity, so it can come above what is said on the land registry. Therefore, a cohabitation agreement is less binding. Also, there will be no trustees.

Why would I want to register my declaration of trust as a restriction on the land registry?

This means you can declare your interests early on. Without a restriction, it is presumed that as joint owners you have equal shares in the property. 

Who is responsible for registering the trust arrangement in the land registry?

The trustees are responsible for registering with the land registry. They can do this by entering a restriction. 

Why would you want to change a declaration of trust?

You might want to change the deed if the beneficiaries change, or if the value of your property includes. 

Can a declaration of trust be overturned?

Generally the point in the document is so you cannot change your minds. However, you can update the document with the consent of both parties. If it is a big change, you should write a new deed. If not, you can get a deed of variation. 

What goes into a deed of variation?

A deed of variation should refer to the old declaration and add new clauses. It is important to be clear on which parts you are replacing and how the new terms fit in.

Can a declaration of trust be challenged?

The point in a declaration of trust is that you set out a statement of what you want in the case of relationship breakdown, which prevents challenges further down the line in determining what proportions both parties should get of the sale proceeds. 

Therefore, they are difficult to challenge. However, you can challenge the documents on the basis of fraud or misrepresentation, such as if one owner of the property said they put more towards the mortgage or the property purchase price than they really did. 

You should get legal advice before alleging fraud because it can be hard to make out the grounds.

Is the declaration of trust still valid if the individuals get married?

The law on marriage might take preference over the trust deed you made when buying a property. The documents therefore should consider what will happen if the joint owners later get married. You could also put the terms that were in your declaration of trust joint tenants into a prenuptial agreement, so there is no confusion about who is entitled to what assets and shares.

tenants in common

How will a declaration of trust affect tax?

Tenants in common pay their own tax, and income tax and capital gains tax will be attached to the co-owner based on their beneficial interest. Generally, married people and civil partners are seen to be entitled to income from the property in equal shares. 

If the deed transfers a beneficial interest from one of the owners to another, then you may have to pay stamp duty. Also, if the proportions in which the joint owners hold the property changes, you might have to pay capital gains tax. 

How can I get a declaration of trust written up?

Whether you are joint owners or tenants in common, you want to draft the declaration of trust in the way that suits your needs. 

You therefore get advice from a conveyancing solicitor. They will draft a contract for you to sign, and can have this registered as a restriction in the land registry. This makes sure any new buyer is aware of the declaration of trust, and you cannot sell without both parties’ consent. 

What is the declaration of trust cost?

While you can use a free online template for a declaration of trust, it is recommended that you get advice from a solicitor, who can also draft the deed. 

A declaration of trust is a legally binding document, so getting the wording right is very important, and it can be costly to change. It is expected a lawyer will charge fees of between £200 and £1200.

deed of trust

Why would I want a solicitor to write my declaration of trust?

You do not need to use a lawyer, however it is a good idea, because they will have practice drafting these documents, and extensive knowledge of the law. They can make sure the document reflects your purpose and interest in the property.

Can I make a declaration of trust myself?

Some owners are put off using solicitors duke to the deed of trust cost. Individuals can write out their own, and use someone else as a witness. However, this may have errors or not be a legally binding document. 

The investment of getting a deed of trust when buying a property is often worth it in the long term. 

How is a declaration of trust executed?

Because it is a deed, for it to be valid in law and equity, it needs to be signed, dated, and witnessed property. It is also a good idea to get certified copies of the documents. 

What alternative options are there to a deed of trust?

If there are less than four beneficial owners, you could consider using a tenants in common agreement. This has the same effect on ownership, but you do not need to have trustees.

Frequently Asked Questions

What is a declaration of trust?

This is a legal document which sets out the financial arrangements between two people buying a property jointly, and those with an interest in a property.

Why do you need a declaration of trust?

Buying property is very expensive so you want certainty around the investment you are making. Also, you can avoid disputes with the person you are buying with in the future, because you already have a plan in place for if one person wants to sell their share or the property is sold.

Is a declaration of trust legally binding in the UK?

Trust deeds are legally binding, so it can be enforced in court. A declaration of trust goes above what is said in a title deed on the land registry. Therefore, it can be used to determine the true ownership of the house, and what proportion each individual party owns.

Who should consider a trust deed?

There are two categories of people that trust deeds are especially important for; those buying property jointly (as tenants in common or joint tenants), and those who are buying property and getting financial assistance from someone else, like their parents.

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