Dividing Property Ownership With a Declaration of Trust

With rising property prices leaving many first time buyers needing financial help, and declining marriage rates removing traditional financial protections, property ownership is becoming more and more complex every year.

This is why a declaration of trust from your local Lancaster solicitors is so important. By clearly setting out each party’s share of the property, and the associated responsibilities, a declaration of trust protects everyone’s interests and avoids a lot of potential problems and disagreements when it comes time to sell.

What is a declaration of trust?

Surveys show that between a third and half of all first-time buyers receive help from parents or other relatives to buy a property. Many others are choosing to buy with friends or a partner to help with the cost.

A declaration of trust is a legally binding way to formalise these kinds of joint buying agreements. Each agreement is bespoke to your unique circumstances and can cover a wide range of homebuying arrangements.

This binding legal document can also protect the interests of a partner who moves in and contributes to the mortgage without having their name formally added to the mortgage deed. It also protects the interests of cohabitees, where one person pays for refurbishments or home improvements that add value to the property.

How does a declaration of trust work?

You might think that you don’t need a declaration of trust because you can trust your partner, or your friends, to honour a ‘handshake agreement’. However, if that relationship breaks down, things can quickly get complicated. Even a homebuying loan from your parents can cause friction if circumstances change over time.

A declaration of trust clearly sets out each person’s share of the property from the start, so that there are no misunderstandings, mis-remembering or disagreements later on. The declaration includes details of:

• How much each party has contributed to the deposit
• How much each party therefore owns and what share they will get from any net sale proceeds following a sale
• What happens if one of the parties wants to leave or buy the other(s) out

They can also include details as to:

• How much each party will contribute to the mortgage
• Who is responsible for maintenance and repair costs

Who needs a declaration of trust?

Most people buying a property with another party should consider a declaration of trust. For example:

• Buying a property with friends
• Buying with a loan from parents or other relatives
• Buying with someone who isn’t your spouse (or civil partner)

Married couples, or couples in a civil partnership, who own a property as tenants in common, may still need a declaration of trust. Properties held as tenants in common do not automatically pass to their spouse if one of them passes away. Instead their share would pass in accordance with their Will or the rules of intestacy in the absence of a Will.

Do I need a solicitor for a declaration of trust?

It is important that a declaration of trust is drafted correctly to ensure it is as binding as possible, so it’s always worth engaging a solicitor to help. Not only will they ensure that everything is right in the eyes of the law, they will also use their experience to help you create a document that’s right for you, as Jemma Higson from Lancaster solicitors, Holdens Law, explains:

“When it comes to drafting a declaration of trust, experience is everything,” she says. “At Holden’s Law, we make sure you’ve covered all the details you need to make your agreement watertight, both now and in all potential future scenarios, including aspects of the arrangement that you may never have thought of.”

As your local Lancaster solicitors, Holdens Law will record the appropriate restriction with the Land Registry following completion of the declaration..

How to arrange a declaration of trust

Arranging a declaration of trust with your local Lancaster solicitors couldn’t be easier. Simply make an appointment to talk through your circumstances, and our expert team will work with you, and your fellow homebuyers, to draw up a fair, open and legally binding agreement that protects everyone’s interests, both now and in the future.

To find out more, contact Holdens Law today on 01524 32484.