Declarations of Trust

Declarations of Trust, or ‘Deeds of Trust’, are used in property transactions when two or more people decide to buy a property together as tenants in common, as opposed to joint tenants, (i.e., they don’t own the property equally but will have different shares in it which won’t pass to the other co-owner on death).

A Declaration of Trust for tenants in common sets out each person’s contribution and the proportions of the property they own, while it can also set out and factor in contributions to mortgage payments and other outgoings. The Declaration of Trust is then referred to when the property is sold so as to ensure that each owner will get their due portion of what they put into the property.

Another use for a Declaration of Trust is when the legal owners of the property, the trustees, are to be the registered owners but others have contributed to the purchase price and want their interest noted. Commonly this would be when a third party such as a parent assists with the purchase of a property by putting up some of the capital but is not to be named on the property’s title. The parent can therefore register their beneficial interest on a trust deed and protect their interests. Even if the parent’s contribution is a gift and not an investment a parent can also use a Declaration of Trust to protect against the child’s partner and joint owner of the property from receiving any of the gift in the event of a relationship breakdown.

Without a Declaration of Trust, there is more chance of time consuming and costly disputes about the division of proceeds when a property is sold or the relationship between the parties breaks down.

There are various provisions that can be included in the Declaration of Trust, such as:

• if there’s a relationship breakdown between the parties a procedure to govern the sale of the property;
• agreement as to the division of sale proceeds in the event of a decrease in value of the property below the price originally paid for it;
• how mortgage payments, council tax, insurance, maintenance and household utilities payments are to be divided between the owners;
• an indemnity by one co-owner to another if the mortgage has been secured by only one of the co-owners;
• an adjustment mechanism if one party pays for improvements or repairs to the property or pays for all of the outgoings for a period of time;
• a first refusal ‘pre-emption’ right to purchase the property if one of the co-owners wants to sell;
• valuation methodology to follow, particularly if a there is a fall out or deadlock between the parties; and
• a lodger being taken in if one party moves out.

The above examples are not an exhaustive list and the Declaration of Trust will be tailored to suit your circumstances and bespoke requirements.

Under normal circumstances, it is not possible to register a declaration of trust at the Land Registry. This is because of the operation of section 33(1) (a)(i) of the Land Registration Act 2002 which provides that it is not possible to register a notice in respect of an interest under a trust of land. This provision is designed to ensure that trust documents generally are not open to public inspection and the specific details or trust arrangements are kept confidential.

Therefore, the declaration of trust document itself remains a private document and it is prudent for each tenant in common to retain a copy of the executed declaration of trust to prove their entitlement.

Please see our detailed article here, in relation to this topic.

How we can help

Taking expert legal advice on your declaration of trust is imperative. Look no further if you are seeking a competent, sensible and pragmatic approach to advising on and producing a bespoke Declaration of Trust to suit your requirements. We would be happy to help and discuss a suitable fee mechanism to suit your needs. We will assist you with a commercially focused approach ensuring the greatest possible care and attention to detail.