Declarations of Trust

We advise couples who are buying a home together, as to how to protect their investment and avoid a dispute in the future.

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Claire Fountain
Partner and Head of Residential Property

This is a very complex area of law. At TWM Solicitors, we advise couples who are not married or are not in a civil partnership when they are buying a home together, as to how to protect their investment and avoid a dispute in the future. We can draft Declarations of Trust and Cohabitation Agreements. We also act for separating parties in respect of their applications to Court concerning their property interests and any claims for financial provision in respect of their children.

What is a Declaration of Trust?

In its simplest form, a Declaration of Trust is a snapshot of how you hold the property, usually stated at the time of purchase. It can contain confirmation of the contribution towards the purchase price and costs of purchase, so if one party paid more they may recover the extra if the property is later sold. It can, however, be a much more detailed document dealing with:

  • The relationship and obligations between the owners in respect of the property;
  • How the ownership shares might change over time;
  • What happens if one or more of the co-owners wants to bring an end to the co-ownership.

Declarations of Trust are often used by unmarried couples, couples with children from previous relationships and investors in property to give just a few examples.

Owning a property jointly

On the purchase of a property by two or more people the purchasers will be joint owners and must elect how they wish their joint ownership to be recorded at Land Registry.

There are two options as follows:

Joint Tenants

Holding the property in this way means that on the death of one owner, their share will immediately pass to the other joint owner. This is independent of any Will that the deceased may have in place. This means that the survivor can sell the property on their own. Choosing this option means that you will share the proceeds of sale equally.

Please note that this is not necessarily the most appropriate option even if you are married, particularly if you are making Wills to protect your assets for beneficiaries other than your spouse or civil partner.

Tenants in Common

Holding the property in this way means that on the death of one of the property owners, the share will not automatically pass to the other joint owner and will instead pass in accordance with any Will the deceased may have in place or, in the absence of a Will, by the Rules of Intestacy.

If you choose tenants in common you can decide any distribution of the value. If you own the beneficial interest as tenants in common, each owner owns a specific share of the property. You will both agree what this percentage is at the time you buy the property. This can be held in equal or unequal shares.

You can, therefore, take into account any financial arrangements and your intentions regarding your ownership of the property. You may decide that one of you should be entitled to a greater share of the sale proceeds than the other if you have made unequal contributions to the purchase price, mortgage or later improvements and want this formally recorded in writing.

In these circumstances, we recommend that a separate Declaration of Trust is prepared to state the share you each own. This Declaration can also include details relating to your ongoing contributions and obligations in respect of the property, such as how mortgage payments, repairs and decorations costs etc. are to be met and how that might impact on the shares of property ownership.

Tax implications

There may be tax implications depending on how you choose to hold the property and we recommend that you consider taking tax advice before you make any decisions. This is a service that we are able to offer you if you do not have your own tax advisor already.

For further information, please contact Claire Fountain, Partner and Head of Residential Property.

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