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?
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 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.
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.
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.
To read the full article, click here.