In the midst of a cost-of-living crisis and with property prices skyrocketing, people are seeking agreements with friends or partners to help them afford a home. In these instances, a declaration of trust can ensure that everyone is treated fairly for their contributions in the event of a future sale of the property. The legally binding contract can provide assurance to property owners that their investments are safe and respected if selling is eventually considered.
What is it and why should I get one?
A declaration of trust legally binds all the investors in a property into an arrangement. Breaking this arrangement results in legal troubles, meaning your investments are in safe hands, even if relationships sour after signing.
Commonly used by partners or groups of friends, a declaration of trust allows all of the investors to track how much each person contributed, how much they will continue to contribute (through mortgages or other bills), the percentage of property owned by each party, and how much each party gets back in the event of a sale.
Declarations of trust come in two categories: tenants in common, where owners have differing property shares, and joint tenants, where owners have equal property rights. Discussing these options with a specialist solicitor who will provide advice and help you arrange the best agreement for your particular circumstances is a good idea.
What happens in the event of a death or divorce?
For joint tenants, if one owner dies, the other receives full ownership of the property, down to the last member, who can then pass it on in their will.
In the case of divorce, the details get a little more complex. The Matrimonial Causes Act means pre-arranged agreements in property or other interests aren’t upheld by the Family Court
However, courts will consider the declaration of trust when seeking how to divide up the property. This doesn’t mean their decision will adhere to the terms of the document, as there is no legal obligation to do so in the event of divorce, but this shouldn’t deter you from the arrangement.
