Do I need a Declaration of Trust?

Are you Joint Tenants or Tenants in Common?

Do I need a Declaration of Trust?
Do I need a Declaration of Trust? Are you Joint Tenants or Tenants in Common?

The housing market is booming at the moment. You may be thinking of buying an investment property with a friend. Or you may be planning on setting up home together with your partner. Whatever your situation and circumstances, whenever you purchase a property jointly one of the questions you will be asked is "do you want to be Joint Tenants or Tenants in Common?"

Property ownership

In a nutshell, if you own the property as Joint Tenants you are assumed to hold equal shares and if one of you dies, the other automatically receives your "share" of the property, irrespective of what is in your Will. If you own the property as Tenants in Common, you can have unequal shares and leave your share in your Will.

It is very common for one party to put in a deposit, or perhaps pay more towards the mortgage payments. In this situation a Declaration of Trust can set out the share of the property each party holds, and specify what would happen in the event of a sale in future. For example, it can be specified that the party putting in the deposit will have that returned to them, and any remaining profits divided in certain shares.

With the increase in cohabitation, it is sensible and pragmatic to set out what would happen in the event that the relationship breaks down and the property is to be sold. Relationship breakdowns are stressful enough without the added stress of having a dispute about how the equity is going to be split.

What is a Declaration of Trust?

A Declaration of Trust is a legally binding document which would remove any uncertainty and disagreement if things did not work out.

A Declaration of Trust can also set out how the mortgage and any bills are paid. Ideally, it should be set up at the time of purchase and then registered at the Land Registry. However, it can also be entered into at a later stage, for example if you move in with your partner and they already own a property.

If you are considering buying an investment property with a friend, a Declaration of Trust is also useful in setting out how the mortgage and other bills are paid, what happens to any rent received and how the net proceeds of sale are divided in the event of a future sale.

At the same time, if you do intend to purchase a property as "Tenants in Common" it is also worth thinking about making a Will setting out what would happen with your share of the house.

If you would like further information about the issues raised in this article, please contact me on or call our Wills, Trusts and Probate Team on 01733 882800.

Sarah Dawson LLB, Solicitor

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This article has been prepared for general interest and information purposes only; it does not constitute legal advice and should not be relied on as such. While all possible care has been taken in the preparation of this article, no responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by the firm or the authors.