What is a Deed of Trust, and who is it for?
In the United Kingdom, a Deed of Trust, also known as a Declaration of Trust, is a legally binding document that states the division of property ownership. It is used by “Tenants in Common” who contributed various sums to the property’s purchase. If the property is sold or one party wishes to be bought out in the future, both parties will know exactly where they are until the Declaration of Trust is in effect.
Setting out these contractual arrangements in a Deed of Trust from the beginning eliminates all ambiguity about what will happen to each person’s financial investment in the property and, ideally, prevents future disputes.
Who is a Declaration of Trust for?
A Declaration of Trust is commonly used by couples, but it may also be used by family members or friends purchasing a home together.
If you’re buying a house 50/50 with your partner, you’re less likely to need a Deed of Trust because the final selling value of the property will be divided equally after any legal expenses are deducted.
A Deed of Trust, on the other hand, guarantees that each party receives their equal share of the investment if you both put different amounts of money into it. In the unlikely event of a break-up or disagreement, this can be extremely useful.
If Sam and Paul purchase a house for £250,000 and Sam puts down 60% of the deposit while Paul puts down 40%, a Declaration of Trust ensures that when they sell the house, Sam gets 60% and Paul gets 40%.
If the couple didn’t have a Deed of Trust in place, they might get into a conflict over who owns what share of the house, and there would be nothing stopping Paul from claiming 50% instead of his 40% because the house is jointly owned.
Furthermore, if Paul made a larger monthly mortgage payment than Sam and also paid to have the house furnished, this can be noted on the Deed of Trust.
What is a Deed of Trust Used for?
A Declaration of Trust is most commonly used to maintain a legal record of the various contributions made to a property, but it may also be used for a variety of other purposes. Some examples of considerations that can be dealt with are:
- How much has each party contributed to the property?
- What is the value of each person’s share of the property?
- If one person has contributed additional funds at a later date, such as for renovations.
- What portion of outgoings, such as mortgage payments, bills, and maintenance, each person is responsible for.
- If a third party, such as a parent, has made a financial investment but is not listed on the title deed but still wishes to protect their investment.
- If one party simply refuses or unable to purchase the other’s interest in the property and wishes to formally surrender it.
Can I create my own Declaration of Trust?
Although you may make your own Declaration of Trust for your property, you may, unfortunately, discover that it contains errors and is not recognised in a court of law. We recommend having your Declaration of Trust prepared by our conveyancing solicitor because it will be legally binding.
When you employ our solicitor to draft your Deed of Trust, you’re giving yourself full peace of mind that your investment is secure.
How does a Deed of Trust work?
The great thing about a Deed of Trust is how versatile it is since it will be written specifically for your needs. Because of this versatility, you’ll need to meet with our Declaration of Trust specialist to communicate about what you want your agreement to protect.
After that, your Declaration of Trust lawyer will draft a contract for you to sign. Your property lawyer will arrange for the changes to be registered on your title deed afterwards with the Land Registry. This ensures that the property cannot be sold without the consent of all parties.
Why do I need a Deed of trust?
A Deed of Trust is similar to a prenuptial agreement in that it protects one or both parties’ properties in the event of a breakup or disagreement, and it is a useful tool for a number of people. When you buy a house, you’re putting a lot of money in, and a Declaration of Trust gives you peace of mind.
Since each case is unique, having a Deed of Trust contract drawn up by a conveyancing solicitor not only protects each party’s investment but also reduces the possibility of a lawsuit if the relationship ends.
Does a Declaration of Trust affect my mortgage?
A Declaration of Trust that does not adversely affect the security of the mortgage lender does not require the lender’s approval. Your attorney has a legal duty to work in the best interests of you, their client, as well as the mortgage lender while drafting the Deed of Trust.
Since the Deed of Trust may be drafted either during the conveyancing phase when you purchased the property or at a later date during your ownership, only your Declaration of Trust solicitor can tell you whether your mortgage lender wants to be told. This is due to the fact that each case is unique.
Can a Deed of Trust be revoked?
As long as both parties are in agreement, a Declaration of Trust may be overturned. The Declaration of Trust may be revised or even waived entirely if the parties consent.
The Deed of Trust should be changed to represent any changes in circumstances, but it cannot be backdated. The deed may be rewritten to represent the changes, but it must be done with the consent of the parties involved. It is better to get a new deed written if you intend to make significant modifications to the current one.
Our fees to draft a Deed of Trust are £395.00