Deed of Trust (Your Property) - Resources

What is a Deed of Trust?

If you a buying a property alongside someone else, you may wish to consider having a ‘Deed of Trust’ prepared. A Deed of Trust (also known as a ‘Declaration of Trust’) is a legal document that can be drawn up between two or more parties as part of a property purchase. The purpose of the Deed is to set out exactly who has a financial interest in the property and what their ‘stake’ in it is.

Most people buy properties together as ‘Joint Tenants’, which means they own the property together equally. This would mean that, should the property be sold in the future for any reason, then both owners would receive a 50/50 split of the sale proceeds. Depending on the circumstances of how the property was first purchased however, you may not feel that this is fair, and a Deed of Trust can help set out how the proceeds of a sale should be distributed.

How Can a Deed of Trust Help?

The most common example of how a Deed of Trust can help is where two people purchase a property together, with one contributing more than the other. For example, if ‘Anna’ and ‘Adam’ purchased a property, but Anna provided £20,000 to the deposit, and Adam only £5,000, then a Deed of Trust could be prepared to ensure that Anna would receive a larger amount of the sale proceeds should the property ever be sold. A Deed of Trust is a very flexible document, and you can decide upon the terms of how you would like the money distributing. For example, you could have the Deed list specific amounts, saying that Anna would receive her £20,000 back and Adam his £5,000, with the remaining proceeds then being split 50/50. Alternatively the amounts could be expressed as percentages instead, saying that Anna was entitled to 80% of the entire sale proceeds and Adam 20%. Similarly, if Anna were to also contribute more to the mortgage payments, or pay for renovation work on the property, these costs could also be included within the Deed.

A Deed of Trust can also help where someone else has a financial interest in the property, other than the owners named on the deeds. If Anna’s parents had given her that £20,000 deposit for instance, then the Deed could protect their investment by saying they are entitled to £20,000 back should the property be sold. Without a Deed in place half of the £20,000 deposit would essentially be Adam’s.

In an alternative scenario, where Anna already owned the property, then met Adam and he eventually moved in, a Deed of Trust could also help protect Adam’s interests. As Adam wouldn’t be on the deeds to the property, he normally wouldn’t be entitled to anything at all should it be sold in the future. If he were to live there and start paying towards the mortgage, energy bills, redecorating, etc, then a Deed could be drawn up to reflect his financial contributions in the property.

A Deed of Trust ultimately offers protection and peace of mind for everyone involved when buying a property. Whilst you may be on excellent terms with your partner, family member, or friend today, relationship breakdowns can unfortunately happen in the future. Without having a legal document like a Deed of Trust in place, then anything you agree between yourselves is essentially just a verbal agreement, and not legally enforceable should the worst happen and disputes arise.

How Can Our Conveyancing Solicitors Help?

If you are planning on purchasing a property and have any queries about how a Deed of Trust may help in your circumstances, please do not hesitate to all us on 0330 017 6303. Our conveyancing team are very familiar with preparing Deeds and would be more than happy to help in making sure your wishes are accurately reflected.

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