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What is a Declaration of Trust?

Emma Lunn

Written by

27th Aug 2021 (Last updated on 27th Aug 2021) 7 minute read

A declaration of trust is a legal binding document recording the financial arrangements between everyone who has a financial interest in a property. It will set out what each person is entitled to and what should happen if the property is sold.

You might get a declaration of trust if you are buying a property with:

  • your partner
  • friends
  • financial help from your parents

You’d normally get a declaration of trust at the time you buy a property. If there isn’t a declaration of trust in place, there can be conflict or disagreement about how much money everyone is entitled to when the property is sold. A declaration of trust is legally binding.

You might get a declaration of trust drawn up later on in some scenarios. For example, if your partner moves in and starts to financially contribute to your property.

This article will cover the following:
  1. What is the Difference Between a Declaration of Trust and a Deed of Trust?
  2. Who Would Need a Declaration of Trust?
  3. Who Can Enter into One?
  4. What Can a Declaration of Trust Include?
  5. Joint Tenants vs Tenants in Common
  6. How Much Does a Declaration of Trust Cost?
  7. Can You Do It After Purchase?
  8. Does It Affect Mortgages?
  9. Can you Challenge a Declaration of Trust?
  10. Can you Change a Declaration of Trust?
  11. Learn More About Conveyancing

What is the Difference Between a Declaration of Trust and a Deed of Trust?

A declaration of trust is technically different to a deed of trust – but the two terms tend to be used interchangeably.

A declaration of trust confirms the intention between two or more parties to create a deed of trust. It will detail what is being held on trust (i.e. the property) and who has the beneficial interest.

However, it doesn't include any other legally binding clauses.

A deed of trust includes a declaration of trust and sets out a number of clauses and intentions about how the property will be owned and what will happen when the property is sold. The deed of trust will be signed in front of witnesses and registered at the Land Registry.

Who Would Need a Declaration of Trust?

The following situations would need a declaration of trust.

1. Cohabiting couples

    Unmarried couples are not protected in law in the same way that married couples are – contrary to common belief, there is no such thing as a ‘common law’ husband or wife.

    If you buy a property with your partner but you are not married, a declaration of trust can set out what will happen to the property should the relationship later end. This will usually reflect the differing contributions each person made to the deposit and/or mortgage, as well money spent on the property for home improvements.

    It can be a useful document when you’re buying as ‘tenants in common’ rather than ‘joint tenants’. It can also be useful if one person’s parents have contributed money to the deposit.

    2. Someone not on the mortgage

      A declaration of trust can also protect someone whose name is not on the mortgage but who pays money towards it.

      Someone might not be on the mortgage because they have a poor credit history or they are already paying a mortgage on another property. Another common scenario is that one person owns the property and their partner moves in and is not put on the mortgage but makes a financial contribution to the property.

      In these situations, a declaration of trust can reflect someone’s financial interest in the property. A ‘restriction’ can also be entered at the Land Registry to protect the interest of the person not named on the mortgage.

      3. If you’re buying with family help

        You might get a declaration of trust if you are buying a property with financial help from your parents or other family members. In most cases parents will gift, or lend, some of all of the deposit money.

        A declaration of trust can specify how much money should be repaid, and in what circumstances this money should be repaid. For example, the money might be repaid in a certain timescale, when the property is sold, or if a new partner moves into the property.

        4. If you’re buying with a partner and receiving family help

          A lot of homebuyers purchase property with a partner as well as help from their parents.

          In this scenario most parents will want to protect their investment and ensure that if the couple later split up, they get their money back rather than the child’s ex-partner being entitled to half the amount.

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          Who Can Enter into One?

          Any number of people can enter into a declaration of trust.

          They don’t have to be the same parties as the legal owners of the property. For example, a couple may be the legal owners of the property but if one of their parents has contributed to the deposit, the parents can be named on the declaration of trust.

          What Can a Declaration of Trust Include?

          What’s included in a declaration of trust will depend on your individual circumstances. A solicitor will draw up a declaration of trust to suit your financial arrangements and agreements.

          It will normally include things like:

          • The amount each party has contributed to the deposit for the property and how much will be repaid to them when a property is sold.
          • How much money any third party will receive when the property is sold (i.e. if one partner’s parents contributed to the deposit).
          • What percentage of the property each person will own, and how the money will be split if the property is sold.
          • The amount each party will contribute to the mortgage repayments and other outgoings relating to the property (e.g. bills, council tax, furniture).
          • How the property will be valued before it is put up for sale or if one person buys out the other’s share.
          • If the property is to be rented out, how the rental income will be shared.
          • Who is entitled to live at the property.
          • What will happen if one person wants to move out.

          In some cases a declaration of trust will be flexible and cover situations such as:

          • One person contributing more to the deposit but less to mortgage payments than the other person. In this situation the share ratio could change each year until both partners have made equal contributions to the property.

          Joint Tenants vs Tenants in Common

          When you co-own a property as joint tenants, each co-owner owns the whole of the property and neither owner has a specific share. Married couples that own property together are usually joint tenants. When a property is sold, the profits will be split 50:50.

          If you co-own a property as tenants in common, each co-owner owns a specific share of the property. The shares might be unequal, for example if one person has contributed more money to the purchase.

          It is commonplace for tenants in common, rather than joint tenants, to have a declaration of trust.

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          How Much Does a Declaration of Trust Cost?

          You’ll need a solicitor to draw up a declaration of trust. Fees vary from firm to firm and will depend on how complex the document is, the terms included in it, and any negotiations required to agree the terms.

          Some solicitors charge a fixed fee for a declaration of trust. For example, Co-op Legal Services charges £900.

          You might find a declaration of trust template online but it’s much better to pay a solicitor to draft one for you to check you have everything covered correctly and fairly.

          Can You Do It After Purchase?

          Most people set up a declaration of trust when they are buying their property. However, there are some situations where you might set up a declaration of trust later on. For example:

          • If one half of a couple inherits money and uses it to pay off a chunk of the mortgage and wants this investment recorded on a legal document.
          • If someone, normally a new partner, moves into a home owned by the other partner and makes a financial contribution such as paying towards the mortgage.

          Does It Affect Mortgages?

          In most cases a declaration of trust won’t affect your mortgage. A declaration of trust is a personal agreement between you and the other owners of the property.

          Your obligations to the mortgage lender – i.e. to pay the mortgage as agreed – remain joint, regardless of the share of the property you own.

          Can you Challenge a Declaration of Trust?

          It is very difficult to challenge a declaration of trust once it has been signed and registered.

          The only situations where you can challenge it are usually on the grounds of fraud or misrepresentation, or if the declaration of trust was drawn up under duress or was not properly and freely entered into.

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          Can you Change a Declaration of Trust?

          You can change or alter a declaration of trust if both parties agree. You might do this if one party makes a significant financial contribution to the property – for example, using an inheritance to pay a lump sum off the mortgage, or paying for renovations works.

          Learn More About Conveyancing

          This is part of our conveyancing guide. In our next article, we take a look at Homebuyer Protection Insurance. To learn more read what is homebuyer protection insurance?

          Emma Lunn

          Written by Emma Lunn

          Freelance Personal Finance Journalist,

          Emma Lunn is an award-winning journalist who specialises in personal finance, consumer issues and property.

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