Declarations of Trust and Associated Matters
Where two or more people hold a property jointly, it is necessary to decide how the individual parties’ interests are held. The property can be held as Joint Tenants, meaning that you hold the property as if you are one person.
If either of you were to die, the property would automatically pass to the survivor leaving them free to do with the property as they wish. The property can also be held as Tenants In Common, as 50:50 or in unequal shares.
For Tenants In Common in equal shares, upon the death of one joint owner their 50% share will pass in accordance with their Will or in accordance with the Laws of Intestacy where no Will has been made. Therefore it is important to make a Will to ensure that the surviving owner can remain in the property for as long as they wish. There may be times when 50:50 ownership is not appropriate and you would like to hold your property in unequal shares. There may be tax planning and or inheritance issues which would mean that instead of holding the property together under either of the above arrangements, a Declaration of Trust would be better suited for you.
Each of you may be putting in differing amounts at the outset that you wish to protect as a % share in the value of the equity in the property. Alternatively, you may have one party putting in a lump sum but the other contributing toward the mortgage throughout the period of ownership which results in a constantly changing % value.
A Declaration of Trust to may also be used to declare a third party financial interest in the property when this third party is not registered owner on the title deeds. Before deciding that this is the best option for you, you should consider your circumstances carefully. If either has a child from a previous relationship, you may want your share of the property to pass to that child. If you hold as joint tenants and are the first to die, your share would automatically pass to the surviving joint tenant and if they subsequently fall out with your child then this could leave your child without any interest in the Property. Whatever the position, Brearleys can assist in drawing up a Declaration of Trust at a fixed cost that is tailor made for you, fully reflecting your intentions to help prevent any subsequent dispute over entitlement in the future.
Once drafted and signed, the Declaration of Trust ca be protected by way of restriction on the title register to the property so that the property cannot be sold unless a certificate is given that the sale is in accordance with the terms of the Declaration.