Buying property together - do you need a Declaration of Trust?

Property is in the news at the moment – not enough houses, prices escalating and the government schemes to help first time buyers get on the property ladder. This is before considering the loan or gift by mum and dad to help with the deposit.

For couples purchasing their first property it is an exciting time but not many are able to contribute in equal shares towards their new home or require their parent’s financial help.

Although it is far from romantic it is immensely practical to consider what would happen in the event of a relationship breakdown in the future, or the death of one party. This is where a Declaration of Trust can save hours of expensive arguments and wrangling over who paid for what and who is entitled to what share.

A Declaration of Trust sets out each person’s contribution towards the purchase price of the property, how each person will be contributing towards the mortgage, the insurance, bills and any additional property maintenance that may be required. The document will also make clear how the equity will be split if the property is sold or how the income will be split if the property is rented.

A Declaration of Trust is very useful where one or both parties have benefited from a family gift of money or an inheritance and wish to protect their share of contribution for their future. The document confirms the true ownership of the property in the proportions contributed by all the parties regardless of the title entries at the Land Registry. This is essential if some of the contributors are not mentioned in the title register, for example, if one of the parties has another mortgage in a different property and would not be entitled to become a party to the new mortgage or to protect the parent’s interest when lending sums of money and are not registered as owners of the property.

"Ideally, a Declaration of Trust should be set up alongside the purchase of the property, but it is possible to have it done after completion of the property purchase. There are many other scenarios where a Declaration of Trust would be useful, not just in property purchase, and our legal team will be happy to answer any questions," advises Wills & Tax Associate Malky Chaloner.

Our Wills & Tax Team, based in Christchurch, also cover Bournemouth, Poole and the New Forest. For a free initial chat, please call 01202 499255 and Malky or a member of the team will be happy to discuss any questions that you may have.