Do I need a Declaration of Trust when buying a property?

In all the excitement of a new home together, it’s easy to forget to take steps to formalise your legal position or protect the money you’ve invested. Discussing a Declaration of Trust is often the last thing on your mind.

What is a Declaration of Trust?

Also known as a Deed of Trust, a Declaration of Trust is a legally-binding document which records the financial arrangements between joint property owners, and/or any other party with a financial interest in the property.

It allows you to specify how the property would be dealt with if you and your partner separate. It includes what percentage of the proceeds each of you would be entitled to if the property were sold.

Why do I need a Declaration of Trust?

When purchasing a property, you should always consider what your interest in the property is and how you want to protect it.

Your interest depends on how the property was funded at the point of purchase and what contributions have been made. It also accounts for any improvements carried out during the period of ownership. It’s important to be clear about each party’s interest in order to avoid a dispute arising at a later date.

We understand this is not an easy conversation to have, but it’s an extremely important one. If you’re unsure of your position, it’s important to seek legal advice. If matters are left to be interpreted at a later date, a long and costly legal battle can ensue.

For example, should you not be the homeowner but someone who contributes significantly to the property, you would need to take steps to protect your interest. Your name and/or your interest will not be noted against the property unless you take steps to formalise it.

When more than one person is contributing to a property, whether that be in unequal shares of the purchase price by way of mortgage payments or any other significant financial contribution, the advice is always to take advice and consider entering into a Declaration of Trust, detailing each party’s respective share in the property.

What happens if I don’t have a Declaration of Trust?

If there is a dispute as to the extent of your interest in a property and your interest has not been protected by way of a Declaration of Trust, or any other method, the burden will be on you to evidence your interest. This is a much harder exercise than simply relying on a Declaration of Trust or similar.

In the absence of a Declaration of Trust, an interest can be established in the property through a ‘resulting trust’. This requires evidence of a direct financial contribution to the property by way of a ‘constructive trust’. This is where a common intention between the parties can be used to evidence an interest, or by proprietary estoppel where there has been an assurance given and relied upon to a party’s detriment.

Claims of this nature are often complex, resulting in lengthy and costly legal proceedings. It is therefore advisable to formalise your position as soon as possible.

Further information

If you’d like to speak to someone in our dedicated Trusts team about putting together a Declaration of Trust, or to contact our Litigation team about a dispute surrounding your interest in a property, call us on 0117 905 9763 or contact us through our online enquiry form.