What is a deed of trust?
A deed of trust is essentially a document which explains the ownership of the “beneficial interests” in a property. In other words, who gets what if (and when) it is sold and who is responsible for paying certain bills.
What is a declaration of trust?
A deed of trust is sometimes called a declaration of trust. It is the same legal document relating to property ownership in England or Wales.
What information goes into a deed (or declaration) of trust?
That depends partly on the reason the deed of trust is being created.
For example, a couple buying a property together with unequal contributions to the deposit may want a very simple trust deed, stating only how the proceeds of sale should be distributed in the event of a sale.
However, two friends buying a property may want to go further than that and make clear who is to pay the mortgage or insurance or for decoration or repairs. A couple getting divorced with only one of them remaining in the property will want to specify whether or not any “rent” is to be paid or how long the property should not be sold for.
I can help you decide what information needs to be included in your deed of trust. Contact me to find out more.
Who should have a deed of trust?
There are many situations in which you should have a deed of trust. Here are the some examples.
If you are buying a property with another person and you have agreed with that person that you will not own the property exactly equally, you should have a deed or declaration of trust to confirm how the proceeds of sale are to be apportioned on a sale. Do not assume that a verbal agreement is enough. It’s hard to prove what was agreed unless it is written down.
Agreements in relation to property need to be in the form of a deed to be legally binding.
If you are helping a son or daughter, or another family member (or even a friend) to buy a house and you are providing some or all of the deposit, you should have a deed of trust to protect your interest in case your relationship sours or the other owner of the property gets marries or dies.
If you are going through separation or divorce and one of you will remain in the family home for a while but it will be staying in joint names, you will need a declaration of trust to make adjustments to your share of the ownership or specify who is to live in the property and when it is to be sold.
Jointly owned property
All transfers of ownership of property in England and Wales have to be registered at the Land Registry.
There are two ways of registering property which has been bought jointly with one or more people. You can register as “joint tenants” or “tenants in common”.
The first point to make note of is that even though the terminology refers to “tenants” this is nothing at all to do with rented property.
Joint tenants and tenants in common
It is very important to understand the difference between joint tenancy and tenancy in common and it is vital to check your title deeds to see how you own any jointly held property.
This is because joint tenants cannot pass their share of the property on in their will after death. Tenants in common can.
Joint tenants explained
Joint tenants have an identical share in the property. They both own the whole thing. They don’t own half each.
This means that if one of them dies, the other one still owns the whole property.
There is no “share” to go into the deceased’s estate. It cannot be left to anyone in a will.
Sometimes you will see this referred to as the “right of survivorship”.
Tenants in common explained
Tenants in common each have their own individual share in the property. This can be any size. Often a couple buying a property in joint names as tenants in common will have an equal share each. But it is common, where one person is paying more of the deposit than the other for example, for one person to have a larger share of the property.
If a “tenant in common” dies, his/her share is passed on according to his/her will or, if there is no will, according to the rules of intestacy. The other owner (or owners if there is more than one) do not automatically inherit and the “right of survivorship” does not apply.