Declaration of trust for property

What is a deed of trust for a property?

A Declaration of Trust is a legal document, usually entered into at the time 2 or more parties are about to complete a property purchase, which outlines the financial arrangements between the co-owners. Ensuring you have a declaration of trust in place is particularly important when :-

• Unequal contributions - if the owners haven't contributed equally to the purchase price.

• Joint ownership - to clarify the ownership shares and rights of each party.

• Future events - to specify what happens in future scenarios, such as a sale, divorce, or death and whether either party should have the right to buy the other out.

• The relationship is uncertain - such as unmarried couples or if you are buying with a friend or a fellow property investor.

A detailed declaration of trust will help keep you legally protected if the worst should occur as it will record financial information and intentions at the time the property was purchased.

What is a trust for sale?

As co-owners, in law, the starting point is that as legal owners you will hold the property on trust for the owners of the equity in the property. Consequently, there is always a form of trust where  property is jointly owned, whether you have a declaration of trust in place or not. This is known as a trust for sale and creates a legal presumption that if 1 of the owners wants to sell, the property should be sold. Many co-owners do not want this to apply and want to agree more detailed rules and procedures about this situation, which is a good reason to get a property deed of trust negotiated and agreed.

Joint tenants or tenants in common?

There are 2 methods of co-owning property on trust. Unless otherwise indicated co-owners will own as joint tenants. This is a presumption that the equity is owned 50:50 and, very importantly, on the death of 1 owner, his or her share will automatically pass to the other owner (known legally as the "Right of Survivorship"), overriding even a will which says otherwise.

The other option is called tenants in common where there is no presumption of who owns what proportion in the equity in the property and there is no right of survivorship. You do not have to have a declaration of trust to choose tenancy in common but in most cases, a declaration of trust will set out which form of co-ownership applies, the proportions of equity owned and other agreed aspects of the joint ownership.