Joint Ownership – Do I need a Declaration of Trust?

Joint Tenants

In this instance, each buyer is treated as owning the whole of the property and they do not own a specific share in the property.  Upon the death of one of the buyers, his or her share automatically passes to the other buyer by operation of law irrespective of any Will or intestacy rules.  As a Joint Tenant, you cannot give away your share of the property by your Will. Therefore in this instance a Declaration of Trust is not applicable.

Tenants in Common

In this instance, each buyer has a distinct share in the property such as 50/50, 60/40 or such other proportion as agreed.  Upon the death of one of the buyers, his or her share does not automatically pass to the other buyer but is transferred in accordance with his or her Will or the rules of intestacy.

Please note that whichever of the above is chosen is generally conclusive as to the share of each buyer (unless the buyers are married or civil partners or later marry or become civil partners).  It is therefore vital to ensure that, when the property is bought, the correct form of ownership which reflects the financial or other contributions of the buyers and their joint wishes is stated on the deeds.

What is a Declaration of Trust?   

This is a useful document to have in place when buying as Tenants in Common as it ensures that each homeowner gets a fair portion of what they put into the property and it will set out the proportion which each owner has in the proceeds of sale on the sale of the property, based on their contributions to the deposit, mortgage and ongoing maintenance.

It is important to be aware that the Declaration of Trust is a purely personal agreement and the obligations you have to your mortgage lender (if applicable) will always remain joint and several, whatever you state in the Declaration. It will always remain a fact that if one of you fails to pay the mortgage, the other is wholly responsible.

It is a sad fact that many couples, married or otherwise, subsequently separate.  It is possible, by entering into a Declaration of Trust to avoid difficult situations and prevent arguments as to who gave what at the beginning and who should get what when a property comes to be sold.

What is included in a Declaration of Trust?   

Declarations can be tailored to your specific circumstances, and there are many factors to consider, but they should confirm the following

• The actual proportions in which the owners own their home
• The actual amounts originally spent by each party
• The proportions to be repaid to each homeowner when the property is sold
• The parties’ contributions for the payment of the mortgage and maintenance obligations