Whether you are stepping onto the property ladder for the first time, moving in with a partner or purchasing with a friend or family member, buying a property is an exciting milestone that comes with a lot of financial decisions. When more than one person is involved, it’s essential to think carefully about how ownership of the property is structured and how you will protect your investment in case something goes wrong.
One of the most effective ways to do this is by having a Declaration of Trust in place.
In this article, we will explain what a Declaration of Trust is and why it is important to have one when you are buying a property.
What is a Declaration of Trust?
A Declaration of Trust is a legally binding document that clearly sets out how a property is owned between two or more people. It also records each person’s financial interest in the property; this is especially important where contributions are unequal.
This can be as simple as defining ownership percentages, or it can include more detailed arrangements, for example:
- How mortgage payments are shared
- Contributions to maintenance and upkeep
- How any increase (or decrease) in the value of the property is divided
The flexibility of a Declaration of Trust allows it to reflect your individual circumstances and protect your financial contribution over time.
Which arrangement should you choose?
Before creating a Declaration of Trust, it’s important to understand the two main ways joint ownership works:
1. Joint Tenants – You both own the whole property jointly, rather than having distinct shares. This type of ownership is usually recommended for married couples or those in a civil partnership, but it’s not typically suitable for people who are not in that kind of relationship. If one of you dies, your share will automatically go to the other person.
2. Tenants in Common – Your shares of the property will be separated and divided from the outset, and each of you can decide what happens to your share in your Will. If your situation changes in the future, for example, one of you might want to sell your share of the property, it can cause problems if you haven’t agreed on how to handle it beforehand.
Why is it important to have a Declaration of Trust in place?
Property is often one of the largest financial commitments you will make. A Declaration of Trust protects both parties’ interests in the property by outlining what has been agreed regarding the sale proceeds should you wish to go your separate ways in the future.
It can also cover important matters such as:
- How sale proceeds will be divided
- Responsibility for bills, insurance, and mortgage payments
- Property maintenance and improvements
- What happens if one party wants to sell
- How to deal with any negative equity
- How the agreement can be brought to an end
Without this clarity, disputes can arise, particularly if circumstances change. Having everything documented upfront can save significant stress, time, and legal costs later.
How a Declaration of Trust protects unmarried couples
Unmarried couples do not benefit from the same automatic legal protections as spouses or civil partners, so if you are buying a property together, you need to understand your rights.
We have created a free guide to help you navigate the key issues, explain your legal positions and outline what to consider before entering into a property purchase to protect your interests from the outset.
How Backhouse can help
If you are looking to purchase a property with a partner or move in with a friend and would like to discuss a Declaration of Trust, contact our friendly experts to book a free 30-minute consultation to discuss your circumstances.
Tel: 01245 893400 | 01702 410880
Email: info@backhouse-solicitors.co.uk
Visit our Chelmsford office: 17 Duke Street, Chelmsford, Essex, CM1 1JU
Visit our Leigh-on-Sea office: 22-24 Elm Road, Leigh-on-Sea, Essex, SS9 1SN
Or send us a message through the Contact Us page on this website
