A Declaration of Trust is a legally binding written agreement which records the financial arrangement and confirms the proportions in which two or more individuals own a property, and/or anyone else who has a financial interest in the property. A Declaration of Trust is a legally binding agreement, so those involved must honour the terms set out in the agreement. It is common for a Declaration of Trust to be written for buyers who are:

• Cohabiting unmarried couple
• Cohabiting friends
• Cohabiting relatives
• Business partners

People who purchase a property together may wish to purchase as Tenants in Common. Tenants in Common differs from Joint Tenancy. As Tenants in Common you can own different shares of the property, the property does not automatically go to the other owners if you die and you can pass on your share of the property in your Will to a beneficiary of your choice.  A Declaration of Trust for Tenants in Common records each person’s contribution and therefore the proportions of the property they own. The document sets out the respective beneficial interest of each Tenant in Common based on their contributions to the deposit, mortgage and ongoing maintenance.

The purpose of a Declaration of Trust is to remove any uncertainty as to what will happen to each person’s money. Setting out the financial arrangements between you at the outset will provide clarity, hopefully reducing any disagreements in the future. The Declaration of Trust can be created at the time of buying the property as part of your conveyancing transaction. It will ensure that upon the sale of the property, you will receive back the same percentage of the proceeds as you put in of the distinct share.

A Declaration of Trust can be more detailed than merely confirming the percentage denominations, for example, it can include:

• Percentage split of how the beneficial ownership is held.
• Confirmation of the contribution towards the purchase price, and if one party paid more they may want this recovered prior to the beneficial division.
• How the property is to be divided should the parties separate.
• The parties’ responsibilities towards the mortgage and other outgoings.

It is possible to terminate the Declaration of Trust by giving four months notice in writing to each of the other owners.

To be satisfied that a Declaration of Trust will work for each of the parties to it and to ensure that it will be binding, it is important that appropriate legal advice is taken. BES Legal Ltd can advise on and produce a Declaration of Trust. For further information and advice, please contact us either by phone, e-mail or using the contact form below and we will get back to you as soon as possible.

The purpose of this blog is to provide information and discussion. Nothing on this blog should be relied upon as a substitute for legal advice from a qualified solicitor regarding any actual legal issue or dispute. Nothing on this website should be construed as legal advice or perceived as creating a solicitor-client relationship. Please note that we cannot give advice on individual’s situations or problems on this blog.