Deed of Trust: What Is It?
A deed of trust – also known as a declaration of trust – can help to secure your finances when buying a property with someone else.
It can help to clear up any uncertainty if your circumstances were to change.
Your deed of trust will be particularly valuable if your relationship with your co-owner breaks down and a dispute about ownership then crops up.
What is a deed of trust?
A deed of trust is a legally binding agreement that sets out how much money each person has spent on a property. This can include how much each owner spent on the deposit, how much each person pays on the mortgage and whether anyone else contributed to the cost. It can mean that there is no confusion over who owns what proportion of a home.
If you’re splitting the cost of a property 50/50, you probably won’t need a deed of trust. That’s because you know you’ll receive exactly half of its value if it’s sold. But if you and your co-owner contribute different amounts, a deed of trust can help.
Your deed of trust can set out whether you want to receive a percentage of your property’s value when it’s sold or you want to receive the same amount you contributed and then split the sale profit equally.
For example, if you contributed £30,000 to a house deposit and that was 60% of the total, you could set out that you get your original £30,000 investment back or you get 60% of the total sale profit.
You can take out a deed of trust if you’ve bought a property with a spouse, partner, friend or relative. It isn’t limited to people buying with partners – it can be a smart move to get a deed of trust in place whoever you buy a property with.
It’s also not essential that you are living in the property to get a deed of trust. For example, if you and a friend have invested in a property to renovate and sell, a deed of trust can make sure you receive the same percentage you put in when it is time to sell.
When is a deed of trust needed?
A deed of trust can be most useful if:
- You sell your home
- You owe someone who contributed financially to the purchase their money back
- You or your co-owner gets married or has children – if you own your property as joint tenants, your co-owner will inherit the entire property, not your spouse or children
- You or your co-owner already has children
- Your relationship with the other owner ends
You may also want to have a deed of trust in place if you think there’s any risk that you may have to buy out your co-owner’s share of the property.
It will set out exactly what you will owe them if this ever happens. This can reduce the possibility of a dispute, making it a less stressful time. Without a deed of trust, this issue may end up in court if you can’t resolve it.
You can also include the fact that someone who contributed to the cost of your home will get their money back if you sell it. For example, if your parents helped you buy a house by giving you £20,000 towards your deposit, you could set out that they will be paid back before the rest of the sale profit is split.
There are also occasions – rare as they may be – when a property owner doesn’t want to be included on a mortgage. This could be for various reasons, including that they’re already paying one off. A deed of trust can ensure that their financial investment is protected when there is little legal evidence that they contributed.
What to do
If you’re buying a house and want to arrange a deed of trust, your conveyancing solicitor will be able to get this done for you.
With a deed of trust, your financial contribution towards a property is secured. You don’t have to worry about what you’ll end up with if your relationship ends. It can provide peace of mind.
To find a specialist conveyancing lawyer with the experience you need, just get in touch with First4Lawyers. Give us a call, make an enquiry online or try our quick and simple conveyancing calculator for a quote.
