With the high cost of getting on the property ladder, buying a property with a friend or partner is increasingly common. Co-owners of such properties need to make sure they are clear about how much of the property is owned by each individual.
Property co-owners should seek advice about making a Declaration of Trust to verify their shares in the property and to protect their interests.
A Declaration of Trust is a document that sets out how the property ownership is split. Without a Declaration of Trust, the presumption is that co-owners hold the property in equal shares, but this may not reflect the true picture.
Perhaps co-owners contributed unequal amounts to the deposit or are responsible for an unequal share of the property’s running costs? In these circumstances the co-owners can make a Declaration of Trust setting out their respective shares in the property so that in the event of a sale each party knows that they will receive back their share set out in the Declaration.
Another use for a Declaration of Trust is where another party (for example a parent) contributes funds towards a property purchase. Typically their name would not appear on the legal title to the property, but a Declaration of Trust can protect their financial stake by setting out a share of the net proceeds or fixed sum that they would receive if the property were sold.
For spouses and civil partners who jointly own buy-to-let properties, a Declaration of Trust can have a tax-saving advantage by declaring the spouse or civil partner on a lower income tax rate should receive all or a greater share of the income.
Any Declaration of Trust will typically involve the property being held by the co-owners as “tenants in common” and should always be made alongside a review of the owners’ Wills. There can also be tax implications when making Declarations of Trust, especially for non-spouses or non-civil partners, so professional advice should be sought before signing one.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.