I come across this very important question with a lot of my Clients.  The circumstance may be that my Client is purchasing a property with their partner or friend or the ‘Bank of Mum and Dad’ is providing some part of the capital for an adult child to buy the property.

Let’s go back to basics… 

There are three ways you can own a property and the options should be given to you when you initially instruct your Conveyancing Solicitor. 

First, you can own a property as Joint Tenants.  Basically, each person owns an equal undivided interest in the property and no specific individual shares.  If a Joint Tenant dies, then their share passes automatically to the survivor.

Alternatively, you can own a property as Tenants in Common - either in equal or unequal shares.  Note that if you hold the property as Tenants in Common, you can leave your share independently under your Will.

It is a good idea if you are contributing different amounts to the property, that you discuss with your Conveyancing Solicitor the option of a Declaration of Trust.  This will be completely tailored to your individual circumstances. 

What is a Declaration of Trust?

A Declaration of Trust is a record of the financial contribution put into a property by each party.  The contribution may be the initial deposit or ongoing responsibilities to pay the mortgage, bills and suchlike.

The purpose of a Declaration of Trust is to document how the sale proceeds are to be divided in the event of a sale and therefore creating a legally binding record to ensure that the investment is paid back to you in an unforeseen event. 

A relationship breakdown with a partner, friend or family member may not seem like something one would wish to consider, especially when you’re so wrapped up with the excitement of a new home.  I explain to my Clients to think of a Declaration of Trust as merely a safeguard to protect the parties' interests and to avoid any ambiguity that could occur if this document was not put in place from the outset.

When should a Declaration of Trust be created?

A Declaration of Trust can be created at any point.  However, my advice is always to look at having this drawn up when you purchase the property, before the events of daily life take over.

If you would like to discuss a Declaration of Trust with myself or my team, please don’t hesitate to contact us. 

Rebecca Gunn, solicitor in our Property department