With so many people choosing to buy a property jointly with someone, whether it’s couples setting up home together or family/friends embarking on a joint property venture, the importance of having a Declaration of Trust is often overlooked.
A Declaration of Trust is a binding statement made between co-owners of property declaring the shares they own in the property and how the sale proceeds are to be divided between them.
When purchasing a property with one or more people, your property solicitor will ask you whether you wish to co-own the property as ‘joint tenants’ or ‘tenants in common’.
Should you choose to own as joint tenants, you would not have a defined share in the property. You will share the net proceeds of sale equally with your co-owner/s, even if you have contributed more to the purchase price, mortgage payments or outgoings. If you die the property automatically passes to your co-owner/s.
Alternatively if you own as tenants in common you will own a separate share in the property and you will be able to leave your property share to someone in your Will - or if you have not made a Will it will pass to your nearest relative.
Where you are investing more towards the purchase price or paying a greater amount of the mortgage repayments than your co-owner - and you want to ensure that that investment is paid back to you when the property is sold - then a Declaration of Trust will document how the sale proceeds are to be divided between the co-owners. The Declaration of Trust provides evidence of your entitlement to the sale proceeds and avoids any disagreement between co-owners or indeed third parties such as HM Revenue & Customs or a trustee in bankruptcy.
We can guide you through this process and ensure that your Declaration of Trust is tailored to reflect your investment in the property. It is also worth noting that the terms for buying out your co-owner’s share can also be incorporated into a Declaration of Trust, including how the share/s should be valued in the event that this cannot be agreed between you.