When buying a property to live in with another person, or with financial support from someone else, it’s common to take out a declaration of trust. But what is a declaration of trust exactly?
Summary: Property declaration of trust
- A declaration of trust is a legally binding document that formalises who owns the beneficial interest in a property and their shares, regardless of the Land Registry title.
- It is common where people are ‘tenants in common’ to record unequal deposits, family contributions, or investors’ shares where only one name is on the legal title or mortgage.
- The document covers legal and ownership details, contributions, ongoing costs and what happens in the case of a sale, buy‑out or exit from the property.
What is a declaration of trust in property?
A declaration of trust is a legal document setting out who owns or has an interest in a property and their stake, regardless of how the legal title appears at HM Land Registry.
Also called a deed of trust, it confirms that one person or more holds the legal title to a property on trust for one or more ‘beneficial owners’.
The document records each person’s beneficial share, showing who would be entitled to the sale proceeds and in what proportion.
It is a legally binding agreement under UK law and the courts can enforce it if there is a dispute.
Who is a declaration of trust for?
A declaration of trust is for anyone who has, or will have, a financial or ownership interest in a property – but the legal title does not reflect this situation. For example:
- Co‑owners buying together: Partners, friends, or family members who buy together and want to record unequal deposits or different shares in the equity.
- One name on the deeds or mortgage: Couples where only one partner goes on the Land Registry title or mortgage, but both treat the home as jointly owned.
- Family gifts or contributions: Parents or other relatives who put money in for a deposit and want their contribution in writing.
- Investors: People who fund part of the purchase, but do not appear as legal owners – for example, where a lender limits the number of names on the mortgage.
In short, a declaration of trust is popular for ‘tenants in common’. Each co-owner has a clearly specified share of the property.
What is a ‘tenant in common’?
One of the main types of joint property ownership is a ‘tenants in common’ arrangement. Key characteristics include:
- Separate shares: Each co-owner has a clearly specified share of the property.
- Transfer rights: Co-owners retain the ability to transfer their property share without requiring approval from fellow co-owners, in principle.
- Inheritance: In the event of a co-owner passing away, they can pass on their property share to a designated beneficiary in their Will or the laws of intestacy determine who gets the share.
‘Tenants in common’ is not the same thing as the other type of joint property ownership, ‘joint tenants’ – a key difference is that the ‘right of survivorship’ is a key feature in the latter arrangement.
Learn more in this guide – what does tenants in common mean?
What is in the document?
Tenants in common need to make sure the declaration of trust reflects their specific circumstances, so the document might include, for example:
- Legal details: Land Registry title number, property address, party names, document date, signatures.
- Ownership details: Who the legal owners are (the names on the Land Registry title), the beneficial owners (who have the equity), what the percentage share is and how much each person has paid so far.
- Contributions and ongoing costs: How much each party will continue to pay (e.g. towards the mortgage) and share expenses (e.g. for a major property renovation).
- Use, occupation and control: Each person’s right to occupy the property, how they will decide to sell the property and what happens if one person wants to leave.
- Sale, buy-out and exit terms: How to value the property if one party buys the other out, how long they have to complete the buy-out and the order of payments (e.g. mortgage first, then deposit contributions etc.)
A solicitor or conveyancer prepares the declaration of trust. Learn about the differences in this guide – conveyancer vs solicitor for buying a house.
Why sign a declaration of trust?
A declaration of trust is a good idea for certain scenarios. For example, in case one of the ‘tenants in common’ will want to sell or move out in the future, they may want a clear exit plan and agreement on ownership shares.
One of the co‑owners may want to change their shares because they have overpaid on the mortgage, bought more of the other’s interest, paid for an extension and so on.
In situations where it’s a first‑time buyer getting help from family e.g. ‘the bank of mum and dad’, they may want the contribution in writing in case of a sale.
Property owners wanting to give or pass on a share of the beneficial interest (e.g. to adult children) without changing the names on the legal title may also choose to sign a declaration of trust.
When should you sign it?
Usually, you would sign a declaration of trust when you buy the property. However, you can also sign the document long after completion.
This is particularly the case if circumstances change – for example, if buying the property as joint tenants but then one party makes a bigger financial contribution and wants this in writing.
How long does it take?
The time between asking for and signing the document only needs to take a few days or weeks in most cases.
However, complex arrangements can slow things down significantly. Requests for information that go unanswered (e.g. around one party’s precise contributions) can also slow the process down.
Find out about what can hold up exchange of contracts.
How much does a declaration of trust cost?
When searching online for a declaration of trust quote, you’ll tend to see a range of prices between £200 and £1,200.
For simpler arrangements, the costs will be relatively low. Complex arrangements could see the price go well beyond £1,200.
FAQs
Does a declaration of trust affect mortgages?
The document itself does not usually change your mortgage payments or who owes the money, but it can matter to the lender if it affects their security over the property.
If the deed gives a person who is not on the mortgage a right to occupy the property, or any other right that could make repossession harder, it could affect the lender’s security.
In those situations, your conveyancer will normally need to show the draft to the lender and get their written consent before you sign.
Does a declaration of trust affect stamp duty?
A declaration of trust does not automatically affect stamp duty land tax (SDLT), but it can if it leads to money changing hands or ‘chargeable consideration’ e.g. a new person taking on part of the mortgage.
Check with your conveyancer or solicitor for more details. SDLT is a complex area and the position can depend on the precise terms of the trust and any money or debt involved, so always take tax advice.
How can a declaration of trust be challenged?
A person challenging a declaration of trust brings a claim in the civil courts, often under the Trusts of Land and Appointment of Trustees Act 1996, asking the court to declare the deed invalid or rectify it.
The court then looks at evidence such as how the parties prepared the document, whether each had independent legal advice and whether there is proof of pressure, fraud, mistake or lack of capacity.
A declaration of trust is legally binding, so a change of heart or relationship breakdown is not usually enough grounds to challenge the document successfully.
Final thoughts: Declaration of trust
Note that joint property buyers confirm their ownership model with HM Land Registry at the outset, but they are entitled to change their type of ownership afterwards.
Changing from joint tenants to tenants in common is called a severance of joint tenancy, involving registering a Form A restriction.
Co-owners need the agreement of all other parties to change from tenants in common to joint tenants though. They need to update the declaration of trust with the help of a solicitor or conveyancer, before filling in an RX3 form to cancel a restriction.
I hope you found this article useful. Elsewhere on the Fine Living blog there are plenty of other articles to help you as a property owner or buyer, including:
If you have any questions or would like to ask about a property in our portfolio, Fine Living is here for you – please don’t hesitate to contact us.
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