At TWM Solicitors, we advise unmarried couples, friends or family members buying a property together, on how to protect their investment. A professionally drafted Declaration of Trust clearly records each person’s contribution and avoids future disputes about ownership or proceeds of sale.
What is a Declaration of Trust?
In its simplest form, a Declaration of Trust sets out your beneficial interest in a property, usually stated at the point 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 regarding 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.
Whilst Declarations of Trust are generally considered binding for non-married couples, for married couples the court has more to consider when determining how the net proceeds of a property should be divided.
Joint ownership options
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.
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
- 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
- in the absence of a Will, their share will pass 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.
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.
Why choose TWM Solicitors?
At TWM solicitors, our family law specialists have extensive experience helping unmarried couples, family and friends protect their interests with regard to property. We provide clear, practical advice and draft bespoke Declarations of Trust that reflect your unique circumstances and intentions.
Talk to our Declarations of Trust solicitors
If you are buying a property together or want to protect an existing investment, speak to our experienced team today. We’ll explain your options clearly and objectively and guide you through the process.