What Is A Declaration Of Trust?

Published: 12/01/2018

A DoT is essential!

If you co-own a property with someone else (your spouse, partner, friends or any others), it is essential to get a reputable solicitor to draw you up a 'Declaration of Trust' (DoT). This is a legal document that will protect you and all co-owners (and probably save you a lot of stress in the future).

What is a DoT?

It is a legally-binding document clearly outlining what each co-owner owns, how the value of the property will be divided should you ever split up or sell up, and so forth. It records what each owner has contributed to the property, including the initial deposit, mortgage repayments and/or any financial upkeep of the property. This is particularly useful if one person has contributed more money than the other, as is often the case. It is also necessary where only one person owns the property but another person has contributed to the purchase of the property, but may not be able to be a party to the mortgage or be named on the legal title to the property, however, still wants to protect their interests.

When owning land/property, the interests of the owners of the property are recorded in two different ways. There is the “legal estate” owner/s, who are shown on the title deeds or land registry title entries. Then there are the “beneficial” or “equitable interests ” owner/s, who are not registered at the land registry. The DoT is the document that says the “legal” owner will hold the property on ‘trust’ for the “beneficial” owner/s. As such, both owners are protected legally and it is recognised that the registered “legal” owner is not the only owner of the interests in the property. The legal owners may be the same or different people to the owners of the beneficial interests.

The legal owner(s) are called the trustee(s) and hold the property and the interests in it on behalf of the beneficial owners.

All this is governed by the various law statues such as Trustee Acts of 1925 and 2000 , The Law of Property Acts 1925 onwards and Trusts of Land and Appointment of Trustees Act 1996 to name a few!

Yes, we realise it may all sound a little complex, as any property transaction is. That’s why it is essential to enlist the assistance of a property solicitor to sort it all out for you.

Why co-owners MUST have a Declaration of Trust

Without a DoT, co-owners could end up facing a potentially complex and unpleasant legal situation. If you don’t detail your individual stakes in the property and then later disagree on who should receive what, if the property is sold or transferred and you may need to go through a very expensive and lengthy court case to sort it out.

Furthermore, if you and a partner or family member have both contributed to the purchase of a property, yet for whatever reason one of you doesn’t want to be, or can’t be, listed on the land registry title (e.g. you have another mortgage already or have a poor credit rating or are too old to hold a mortgage), of course it makes sense for you to both be recognised as owners of the interests in the property.

A DoT ensures all parties are legally protected and get what they deserve.

When exactly is a DoT essential?

• Example one

  Sally is buying her first house - yay! Thankfully, she has amazing parents who are putting up some of the purchase price, with the promise of them sharing any ‘profits’ made on the property later on. Sally will of course be the registered owner of the home on the title deeds of the property. However, to safeguard Sally’s parents’ rights and to avoid any confusion going forward, they can be listed as a beneficiary in the DoT. If Sally sells the house, the DoT will state how much of the proceeds will go to her parents. Simple.

• Example two

  Couple John and Jenny (original names, we know!) want to buy a house and live together. However, Jenny is still the owner of a different property with an existing mortgage. As such, she can’t be party to another mortgage or be named on the legal title. A DoT will state that although the legal title is just in John’s name he holds the beneficial interests in it as trustee, for himself and Jenny in the shares set out in the DoT. So if the house was to be later sold, it would be clear who got what.

• Example three

  Friends Annie and Alice are sick of renting so decide to buy a house together, as homeowning housemates. Alice and Annie will be the “legal” owners, but as Alice is contributing 60% of the purchase price and Annie 40% of the purchase price. The DoT will set out their unequal contributions {60/40] and then on sale what they will each receive [60/40] from the net proceeds.

A DoT, detailing co-ownership as tenants in common records each person's contribution and therefore the proportions of the beneficial interests they own.

How do I get a Declaration of Trust?

You will need to get in touch with a solicitor who is experienced in this area, who will talk you through the steps, and get your DoT drawn up for you.

At GWlegal, you will be looked after personally by Linda Cummins, a solicitor with more than 20 years’ experience.

Why are we the best conveyancing solicitors for you?

GWlegal are a property solicitors based in Liverpool, specialising in buying or selling, remortgage, declaration of trust, bridging and buy-to-let landlords.

If you have a legal matter you wish to discuss don’t hesitate to get in touch. You can call us on 0345 373 3737 email us hello@gw.legal with your question.

Who are GWlegal? We’re a national firm with local values.

Co-Owning a Property?

Content correct at time of publication.