A Declaration of Trust is a legally binding contract between joint property owners and/or anyone else who has a financial or beneficial interest in the property.
Typically, an agreement is reached at the time of property purchase.
The purpose of a Declaration of Trust is to eliminate any uncertainty regarding what will happen to each person's money if the property is sold or if one person wishes to buy out the other. Establishing the financial terms at the outset will provide clarity and reduce future disagreements.
Who Should Receive a Declaration of Trust?
If you are co-buying a property with another person and have contributed different amounts to the purchase, you must split the difference.
If someone else is helping you purchase a property and you want to protect their funds, you should use a trust. A Declaration of Trust can stipulate when, how much, and under what conditions money is to be returned. The deed can provide the investor with assurance.
When purchasing real estate with a business partner, can reduce disagreement risk and safeguard everyone's investments.
If you are an unmarried couple living together, Different rights apply to married and unmarried couples.
Cohabiting friends or family members have contributed varying amounts to the property.
If you are purchasing with a co-buyer who is not on the mortgage,
Joint Tenants or Common Tenants?
There are two options for purchasing a property jointly:When two or more individuals own a property jointly, they are considered joint tenants. To illustrate, 100% together. The property is left to the surviving spouse upon death.
Tenants in common occur when the property's owners hold varying proportions of the property. For instance, 50% of each of the dead person's property goes to the people named in his or her will or according to the laws of intestate succession.
When purchasing a property with another person, it is possible that the costs of the purchase, mortgage, stamp duty, and other associated fees will not be equal. One of you may be contributing more to the down payment, while the other may be contributing more to the mortgage payments. Whether you are buying a property as Tenants in Common or Joint Tenants, a Declaration of Trust lets you say how much money each person is putting in and how much money each person should get when the property is sold or when one person buys out the other.
What elements can a Declaration of Trust contain?
It may consist of:
Each person's contribution to the deposit, as well as the amount that will be refunded, you might want to say, for example, that each owner gets their initial deposit back and the rest of the equity is split evenly.
What percentage of the property each person will own and how the proceeds will be divided if the property is sold.
How much will each owner pay toward the mortgage? However, the lender will continue to view payments as joint and several, so if two people are listed on the mortgage, they will both be responsible.
How each person will pay for legal fees, stamp duty, and utilities.
A calculation of a person's ownership percentage in a property based on the amount paid toward the mortgage or for renovations and improvements.
Contact A Solicitors if you wish to make a Declaration of Trust or for more information.
