Whilst it certainly won’t be needed for every home purchase, a deed of trust can be a useful legal document in certain situations. Understanding what this document means will help you to decide whether it will be suitable for your needs.
When might it be used?
Also known as a declaration of trust, this document is designed for circumstances when two or more people own a property together, or when people other than the owner have a financial interest in the property. If the people buying the home together have contributed different sums towards the purchase, or if someone with an interest cannot be recorded as a legal owner on the HM Land Registry title, a declaration of trust could be recommended. Generally speaking, it is advisable to have a declaration of trust in place when the buyers will own the property as tenants in common, or when they would not wish to split any costs or proceeds from a future sale equally between them. It is also often advised when one party has children from a previous relationship, as these children could otherwise miss out if the property is not held as tenants in common.
As with any legal document, it is essential to consult a specialist conveyancing firm, such as Sam Conveyancing, before making any decisions or signing any papers.
The purpose of the document
This legal document is intended to be used by people who are purchasing a property together, and it offers some useful protections. The document records important information, such as how much money was contributed to the purchase by each party, and sets out what would happen in the event of significant changes to the buyers’ circumstances. These changes could include a relationship breakdown, a decision to sell the property, one owner opting to buy out the other, or other people who have contributed funds wanting their money back. The latter can arise when parents have helped their children to get onto the property ladder.
As an example, if a couple were to buy a home together but one of them contributed more money towards the deposit, the declaration of trust can protect the interests of the person who paid more if they later broke up and wanted to sell the property. By recording the amounts each party contributed, the proceeds of a later sale can be divided as agreed; for example, each person might get their contribution back plus a share of any increase in value based on what they originally put in.
You will find lots of information online on how a declaration of trust works.
A final note
When it comes to a declaration of trust, no two documents will be the same, as the details will vary according to the circumstances of the people buying the property. There can be many clauses covering the owners’ intentions, from how they plan to use the property to individual maintenance obligations and how any future sale will be handled. This means that whilst it is possible to buy a DIY declaration of trust online, it is always wiser to consult a qualified solicitor or conveyancer when drawing up such a financially important document.