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What is a declaration of trust and why do I need one?

What is a declaration of trust and why do I need one?

Lee Young looks at declarations of trust for property purchase and discusses the importance of setting out an equity split agreement.

What is a declaration of trust?

Here, Lee outlines what a declaration of trust is, how it works and why you might need one. You can watch Lee discuss this in video format below, or read on for the text version...

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.

Is a declaration of trust legally binding?

Yes, a declaration of trust is legally binding. This means the contract cannot be changed unless both parties agree, in which case amendments can be made.

Why do I need a declaration of trust?

There are many scenarios in which attaining a declaration of trust may be desired:

Protecting the bank of mum and dad

For example, if a couple is using a sum of money from one set of parents to help purchase a property, they may want to create a declaration of trust in order to prevent the parents' money being split with the other partner. 

My colleague Michelle Petersen discusses deposits from the 'bank of mum and dad' further, you can read that article here.

Unmarried Couples

Another situation where a declaration of trust is best used is when an unmarried couple buy property together. The declaration would set out 'who gets what' in the event of a break-up, meaning that a dispute could be avoided.

You can read our guide for unmarried couples securing their living together rights here.

Or, you can read Michelle Hayter's guide for unmarried couples that are separating here.

Names that aren't on the mortgage

A declaration of trust could be useful if you move in with someone who owns their house, with only their name on the mortgage. If you were to contribute to the mortgage or pay associated household costs, a declaration of trust would ensure that you have a beneficial interest in the property, thus protecting your rights.

Read our dedicated article for names that aren't on the mortgage, and protecting your rights, here.

There are many other reasons why using a declaration of trust is favourable. At Frettens we can help draft a declaration of trust that best suits you. We offer a free initial chat for all new clients.

Is a declaration of trust the same as a Cohabitation Agreement?

A Cohabitation Agreement (or ‘living together arrangement’) is a document that details all the financial and living arrangements, for both the present and future, between you and your partner.

A DoT is not the same as a Cohabitation Agreement, the main difference being that it deals with property ownership only; whereas a Cohabitation Agreement includes all financial assets.

Read more about cohabitation agreements in our dedicated article here.

Can you get a declaration of trust after property purchase?

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

Does a declaration of trust affect the mortgage?

A declaration of trust is only between the relevant parties, so in the majority of cases, there is no need to contact the mortgage lender before completing the declaration. However, it is best to ask the adviser involved in creating the deed to confirm that the lender's consent is not necessary.

Declaration of trust disputes

Can a declaration of trust be challenged?

The intention of a declaration of trust is to ensure that there is no dispute or ambiguity in regards to the distribution of financial investment in property, but a dispute is still possible.

The parties involved in the deed must honour its terms: challenging the terms can be very difficult in court. In some circumstances, such as impersonation or fraud, a dispute may of course be upheld in court.

Declaration of trust solicitors

If you wish for us to assist you with the creation of a declaration of trust, or have any other queries related to this article, please feel free to contact us on 01202 499255.

We offer all new clients a free initial chat with one of our bright, friendly lawyers over the phone or by video call.

The content of this article, blog or video is not intended as specific legal advice. For tailored assistance, please contact a member of our team.