 | A Declaration of Trust is a formal agreement used when multiple people have an interest in a property and sets out what each person is entitled to and what should happen when the property is sold. You will need a Declaration of Trust is you want to; · hold the property in unequal shares with a co-owner · provide an interest to someone who is not a legal owner |
In order to own property in unequal shares with a co-owner, you need to hold the property as Tenants in Common. When you own property as tenants in common, the assumption is that you own the property equally between you and so, if you want to hold the property in unequal shares, you will need a Declaration of Trust to determine those shares.
You may want to own the property in unequal shares if for example, one owner made a greater financial contribution to the initial purchase or you want to plan for income and capital gains tax liabilities for investment properties.
Owning property in unequal shares
In order to own property in unequal shares with a co-owner, you need to hold the property as Tenants in Common. When you own property as tenants in common, the assumption is that you own the property equally between you and so, if you want to hold the property in unequal shares, you will need a Declaration of Trust to determine those shares.
You may want to own the property in unequal shares if for example, one owner made a greater financial contribution to the initial purchase or you want to plan for income and capital gains tax liabilities for investment properties.
Providing an interest to a third party
You may wish to give a third party a financial interest in the property but without them being an owner. This may for example be the case if a parent has contributed to the purchase of a property and would like to be re-paid if the property is sold.
You may also have inherited a property and you would like to give a share of the property to your children for example, but you don’t want them to be in control of the property yet.
The declaration
Declarations of Trust vary in complexity and the simplest would set out that you own the property by an agreed percentage, for example, 50% for one owner and 40% for the other and 10% for a third party. These percentages are often calculated in reference to the initial investment each person has made in the property but they can be set at any value as long as all parties agree.
Alternatively, you may decide that, co-owners, on the sale of the property you would each like to receive your initial contribution to the property back and then any additional funds are divided between you by an agreed percentage for example, 50/50.
It is also possible to account for a more complex arrangement if for example, you would like how the proceeds of sale are divided to be ultimately determined by contributions to the capital element of the mortgage, renovations, building works etc.
If you would like to discuss whether a Declaration of Trust would be right for you please contact Jasmin Howlett at jasmin@fairstep.co.uk or on 01394 277 941, alternatively fill out our contact form, and we would be happy to discuss your requirements in further detail.