There can be several reasons why you might need a declaration of trust when buying a property. Here are some examples:

• When people who are unmarried buy a property together it can used to clearly set out how much of the property each person owns. Their respective contributions can be recorded so that in the event of the relationship ending or the property being sold for some other reason their entitlement to a share of the equity (value of the property less any mortgage debt) is defined.  In other words it helps to avoid possible future arguments.
• When parents contribute towards their child’s home and wish to make it clear that their contribution is a loan and not an outright gift. The document can reflect and protect their contributions and set out in what circumstances they would be repaid.
• When a person’s name is not on the HM Land Registry record of ownership or if they are not a party to the mortgage but nevertheless will be making contributions towards the monthly mortgage repayments. For example, where they may have a poor credit rating or where they move into a home that is already owned by the other party, but they still make financial contributions towards the property.

NOTE: Declarations of Trust are flexible documents and can be tailored to fit each family’s and/or couples’ circumstances.

They can also be used to avoid disagreements as to how much each owner will pay towards the costs associated with the arrangements for running the property – e.g., repairs and maintenance and annual insurance and how any mortgage will be paid off.

Addressing ownership shares and responsibilities upfront avoids disputes later. We therefore strongly advise you to finalise the terms of the Declaration of Trust before completing your purchase to ensure clarity and protection for all the parties involved.

However, it is possible to create one at a later stage, for example when the parties are already cohabiting and wish to define their equitable shares in a property or financial arrangements for the future.

NB: If the circumstances of one or more parties change during the period of ownership of the property, then it would be advisable to revisit the original declaration of trust and have a supplemental declaration of trust prepared that refers to the original document, outlines what has happened since, and what the shares are now.

There is no one-size fits all when it comes to preparing a declaration of trust, each will be different with varying terms, depending on the parties needs and wants. We would always recommend that the following should be included in all declarations of trust:

• The amount each party has contributed towards the deposit for the purchase of the property
• The amount contributed to the initial acquisition price
• The amount each party will contribute towards the mortgage repayments and other outgoings
• The percentage of the property each party will own
• The change in percentages if one party contributes more towards major changes, such as refurbishments or additions
• What percentage each party will receive from the sale of the property
• How the property will be valued before any sale
• The process to be followed if one party wanted to realise their share when the other did not
• When the property should be sold in what circumstances

Yes, it is a legally binding document addressing the legal and equitable ownership of the property.

But see below under the section headed ‘Does a marriage or civil partnership override a declaration of trust?’

All parties will also need to demonstrate that they had a full understanding of the contents of the declaration of trust and that they entered into it of their own free will (without any undue influence or duress) and the document will also need to be signed by all the parties and their signatures properly witnessed.

If an unmarried couple with a declaration of trust marries, the provisions in the declaration of trust will not be binding on a family court but could be taken into consideration if the marriage breaks down. The needs of the respective parties will be the first consideration of the court and a court can go behind the declaration of trust, if required, to satisfy those needs.

A declaration of trust is not substantively registerable at the Land Registry. It is also not possible to register a notice in respect of an interest under a trust of land. 

However, the co-owners will want to alert third parties to the existence of the tenancy in common and the need to pay the purchase money to at least two trustees (see our Fact Sheet headed ‘Transfers of Equity’ which explains what a tenancy in common means).

If the property is registered at the Land Registry, protection is afforded by entering a restriction on the Proprietorship Register.

If the property is not registered at the Land Registry, protections is afforded by endorsing a memorandum of the declaration on the conveyance (or the lease) of the property.

A lot depends on when the declaration of trust was completed in relation to when the property was first purchased.

Because a declaration of trust severs any joint tenancy (see our Fact Sheet headed ‘Transfers of Equity’ which explains what a joint tenancy means) that might have been in place when the declaration was made, the deceased’s share of the property will pass under the terms of their will (assuming they made a valid will) or otherwise under the rules of intestacy (if they died without a valid will). 

This means unmarried couples owning as tenants in common need to have wills in place to prevent conflicts, as intestacy rules may lead to the deceased’s partner not inheriting their share, potentially causing disputes.

Yes, it can affect the mortgage on a property. We can check what your mortgage conditions say about declarations of trust and whether your lender’s consent should first be obtained before a declaration of trust is completed.