When you are buying a property with your partner, the last thing you want to think about is what will happen if you separate.
However, where parties are providing differing amounts towards the purchase, for example a gift of a deposit from a family member, or the proceeds of sale of another property, then you may wish to consider making a declaration of trust.
This is a document prepared to reflect the agreement between the owners of a property and record how each party should own their respective shares. The document sets out the contributions made by each party. It also includes what should happen in the event of a relationship breakdown, and/or the sale of the property but this can be varied by the courts. Making a declaration of trust should reduce any uncertainty in the future, provide clarity and hopefully help to avoid any potential disagreements which can be very costly and time consuming.
You can make a declaration of trust at any time, although ideally this should be when the property is purchased. You can also make a declaration of trust when you move into a property owned by someone else. The document enables you to clearly set out the contribution made by each party, whether this is a larger deposit from one party, increased mortgage repayments, a purchase with a friend or even help with the deposit from a third party who will not be named on the legal title. These are some of the scenarios in which it may be useful to consider making a declaration of trust.
The declaration will be registered at the Land Registry. When the property is sold, the proceeds of sale will be distributed in accordance with the terms agreed in the document.
It is also important to consider that a declaration of trust may be affected on divorce, as the Courts have a wide range of powers in relation to this.
If you think you may benefit from considering a declaration of trust and would like to discuss this in more detail then please contact a member of our team.