When buying a property in the names of two or more people it is important to consider whether you would like to enter into an agreement to set out such matters as: the shares in which you own the property, the consequences of certain events such as marriage or death and the circumstances in which the agreement should end.
Such an agreement is known as a Declaration of Trust.
As above, there are various circumstances that might trigger the need for a Declaration of Trust and these might include the following: –
Owning the Property in “Shares”
When two or more parties own a property together they can own it either as Joint Tenants, where all parties own the entire property, or Tenants in common, where each party owns a distinct share. For more information regarding this please see: Tenants in Common vs Joint Tenants.
The way in which you own your property can be documented within a Declaration of Trust which can include extremely detailed information regarding the shares. These shares can, if appropriate, also change throughout the ownership of your property by taking account of numerous factors including contributions (monetary or otherwise) made by each party towards the property.
Consequences of Marriage or Death
It is often the case that individuals will prepare a Declaration of Trust when they are unmarried in order to protect their respective interests. Declarations of Trust do not bind a Matrimonial Court. It is therefore important to note that the document will not be legally binding, but may be of evidential value, in financial proceedings following marriage and subsequent divorce. A key aspect of the document would therefore be to account for future scenarios in order to provide as much evidence to the Court as possible.
On death, if co-owners own a property as Joint Tenants, then the property will pass automatically to the surviving owner(s) regardless of the deceased’s wishes. This can cause problems within families, particularly where parents have gifted money for the purchase or where parties have separate children. It is therefore important that, if it is not your intention to leave your share of your property to your co-owner, you put the necessary measures in place to prevent this from happening automatically.
The Agreement coming to an end
When purchasing a property with one or more other parties it is important to consider how and when you might like to end the relationship in future. This can be accounted for within a Declaration of Trust.
It is important to consider the potential triggers for the end of the relationship which might include; one party giving the other notice, the sale of the property or perhaps the death of a party. It is then equally important to consider what terms you would expect to impose in each scenario.
All these factors can be included within a Declaration of Trust where detailed provision can be made.
Get in Touch
If you would like to consider the preparation of a Declaration of Trust for yourself or, perhaps, a child to whom you have gifted purchase moneys, please contact Charlotte Fox, one of our Private Client solicitors, on 0118 958 9711 or [email protected] for more information.