What is a declaration of trust for unequal house deposits?

If you are buying a property with a de facto partner, civil partner or a spouse and one of you is paying more towards the deposit than the other, you might be interested in a Declaration of Trust, also known as a Deed of Trust.

What Is a Declaration of Trust?

A Declaration of Trust is a legally binding agreement that states the amount of deposit contributed by each individual purchasing the same property. It states that each person will receive the same amount of deposit contributed back if the property is sold. This could be due to the relationship ending.

A Declaration of Trust can have other purposes too, such as:

a)    How much each individual buying the same property will pay towards the mortgage.
b)    Stating the percentage of the property each buyer owns.

When Do You Get a Declaration of Trust?

Most buyers opt for a Declaration of Trust before they purchase the property in the conveyancing stage. This is the optimal time to make agreements, but you can draw up a Declaration of Trust at any time after purchasing the property if desired.

It might be more difficult for all parties to agree on the terms of a Declaration of Trust if you are already going through a breakup and selling the property.

Who Should Use a Declaration of Trust?

Anybody buying a property with an unequal contribution towards the deposit should consider using a Declaration of Trust. Your relationship might be going swimmingly and you don’t foresee a relationship breakdown in the future, but there is nothing wrong with legally covering yourself.

Moreover, a Declaration of Trust can be beneficial if one of the couple’s parents contributes to the deposit through a financial gift. It can legally protect the amount and help them recover their deposit if the relationship breaks down and the property is sold.

Bringing Up the Idea of a Deed of Trust

Some individuals find it difficult to bring up the idea of a Declaration of Trust with their partner because it might suggest they are not 100% sure of the relationship. You could compare a Declaration of Trust to insurance policies. Most people don’t plan to or think they will crash their car - but car insurance is still essential.

Can I Claim a Percentage of Property Ownership?

You can also use a Declaration of Trust to establish the percentage of ownership of a property if it is sold. This might be used if one person makes bigger contributions to mortgage payments than the other. Alternatively, married couples can consider using a Prenuptial Agreement and domestic couples can consider using a Cohabitation Agreement to do this but these requires further legal consideration and specific criteria.

You can also use this to prevent one person’s ownership of a property from being passed to the other property owner(s) if one owner was to pass away.

For help and assistance using a Declaration of Trust, do not hesitate to reach out to our friendly team!

April 2021