Dramatic rises both in property prices and interest rates have led to buyers looking for alternative ways to afford to buy a home. Historically, couples have always joined forces to buy their first property but people are now looking beyond this and starting to pool their resources with friends or gain financial support from relatives. When this happens and multiple people have a stake in a property, a Deed of Trust can be arranged to resolve any difficulties when the home is sold.
What is a Deed of Trust?
A Deed of Trust or, as it is sometimes called, a Declaration of Trust, protects the interests of everyone who is involved in the purchase of a property. If a Deed of Trust is put in place, each person will then get their share returned equally when the property is sold. If there is no deed in place, things can get very tricky, especially if a property sale is caused by the breakdown of a relationship or friendship.
What should be included?
Every Deed of Trust arrangement will be different, so it is always best to seek legal advice to ensure that it works for your situation. However, there are always some factors that need to be included in the documentation:
– How much of the deposit each person has contributed.
– The percentage each person owns of the property.
– If each person will contribute to the mortgage and how much they will pay.
– When the property is sold, how the profits are to be divided.
– How it will work in terms of marketing and valuing when the property is sold.
– If somebody dies, what happens to their share.
It should also include what will happen if, for example, one person in a friendship group of four wants to leave the arrangement while the others are still happy to live there.
The Declaration of Trust cost will vary, depending on how complex the arrangement is. For more information, specialists such as https://www.samconveyancing.co.uk/news/conveyancing/declaration-of-trust-definition-294 can offer more detailed help and advice.
How long can a Deed of Trust last?
The length of the Deed of Trust is usually set to last for as long as the property is owned by the named parties. However, if the property is to be sold or some of the circumstances change, the owners can apply for a Deed of Variation. This can then change the deed to apply to the new set of circumstances but it can have tax or legal implications. If someone who is named in the Deed of Trust dies, the deed should specify what should happen to their share or it will revert to what is stated in their will.