Declarations of Trust for property co-owners

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.