Are you wondering how a declaration of trust can avoid the risk of property disputes further down the line? If so, here is what you need to know:
What is a declaration of trust?
A declaration of trust is a legal document designed to formalise the financial agreements between two people who jointly buy a property and with any other individual or parties that have a financial interest in the property. A common example occurs when two unmarried people decide to buy a home together but put in different deposit amounts or pay different percentages of the mortgage each month.
Without the declaration of trust, any sale of the property would see the equity and liabilities jointly shared 50/50 as default; with a declaration of trust, the couple’s agreed arrangements for a property split are maintained.
What the declaration of trust allows
The declaration of trust will lay out the details of the deposit that each owner paid and how much of the property each person owns as a percentage. Other details such as the individual’s responsibilities for mortgage payments are included, as are the agreed plans for how the property’s equity would be shared in the event of a sale.
The declaration of trust can also be used to register interests by third parties, such as relatives, if they help to fund the purchase of the property. This will see the gift sum repaid before the sale proceeds are split.
Who can make a declaration of trust?
The process for creating and registering a declaration of trust is relatively simple and can be carried out with the help of a solicitor, who will guide individuals through the necessary paperwork and lodge the completed declaration with HM Land Registry.