Cohabiting couples are one of the fastest growing family types in the UK, with many people choosing to live together without getting married. In 2021, there were 3.6 million cohabiting couples according to the ONS. In the unfortunate situation of separation, the aim of a Declaration of Trust is to remove uncertainty and eliminate the chance of disagreements when the property is sold.

What is a Declaration of Trust?

A Declaration of Trust is a legally binding document often made at the time of purchasing a property. This document is intended to: 

• Confirm the extent of their respective beneficial interests.
• Set out any express terms that the co-owners want to include. These might include provisions to deal with a situation where one of the co-owners wants to sell or the proportion of mortgage contributions.

When should I enter a Declaration of Trust?

A Declaration of Trust will ensure that each party receives the equivalent of their investment in the property. If there is no Declaration of Trust in place, it becomes very difficult to determine who should be repaid and how much they are entitled to.

There are particular instances when a Declaration of Trust is always advisable-

Unequal contributions – Very often, the default position is 50:50, and where one person has contributed much more to a property (the deposit, for renovations or towards the mortgage) then a 50:50 split may not be fair- a declaration of trust addresses this.

When one partys name is not on the mortgage- There are many legitimate reasons why someone may contribute to a property but not be named on the mortgage. For example, because of poor credit or other debts that make them ineligible for a mortgage.

A Declaration of Trust will record the practical arrangement and ensure that the right parties retain their beneficial interest, if appropriate

What formalities are involved?

A Declaration of Trust is a legally binding agreement, provided that it has been prepared correctly. In order for the document to be recognised in law it must be:

• Prepared as a deed (a formal legal document, usually drawn up by a legal professional)
• All parties concerned must be able to demonstrate that they entered into the agreement willingly and with full knowledge of what it entailed
• Signed by all parties, and witnessed.

Alongside the legal formalities, all Declarations of Trust should contain:

• The amount each party has contributed to the deposit on the property
• The amount each party will contribute to the mortgage repayments and other outgoings
• The percentage of the property each party will ultimately own
• How much each party will get from the sale of the property
• How the property will be valued before it is put up for sale

Beyond these key pieces of information, various clauses can be added and tailored to meet the specific needs and requirements of the parties.

Considerations for Joint tenants compared and Tenants in Common

When you own a property as joint tenants, it is assumed that each party owns an equal share of the property. If one of you passes away, the other will automatically inherit the other’s share- it is not possible to pass the share via your Will.

When you buy property as tenants in common, each party is considered to own their own specific share of a property and it can be passed on in a Will.

If one owner passes away with no will, their share of the property will be subjected to the rules of intestacy, meaning their share will not necessarily be passed to the other owner of the property, but more likely to relatives of the deceased.

Can a Declaration of Trust be overturned?

The purpose of a Declaration of Trust is to safeguard against misunderstandings and disagreements, and as such it is not easily changed.

That being said, it is acknowledged that people can and do change their minds and so if all parties who signed the original document give their consent, the Declaration of Trust can be amended or rewritten.

For minor changes, a deed of variation can be appended to the original document to add additional clauses. Provided the new deed is explicit in which parts of the original document it is replacing; this can be a simple way to update small details contained in the document.

For larger changes, it may be easier to have the Declaration of Trust rewritten in its entirety. As soon as the new Declaration of Trust is filed, it replaces and invalidates any older versions.

What happens if you get married?

If a cohabiting couple with a Declaration of Trust gets married, the deed will be superseded by the Matrimonial Causes Act 1973.

This means that should a married couple split and reach the divorce court, the court will still consider the Declaration of Trust as an indicator of the couple’s intentions. However, they have no obligation to honour the terms set out in the deed.

For greater certainty and to make legally binding arrangements contrary to the terms set out in the Matrimonial Causes Act, a married couple should consider replacing or supplementing their Declaration of Trust with a pre-nuptial or post-nuptial agreement.

How much does a Declaration of Trust cost?

The estimated fee for a Declaration of Trust will be from £500 plus VAT and will depend on the complexity of the document, the number of clauses it incorporates, and any additional consultations required during the drafting process. Following an initial meeting the fee will be confirmed.

If you are considering entering into a Declaration of Trust, please contact one of our experienced solicitors by emailing hello@glanvilles.co.uk who would be happy to assist.  

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice, and should not be relied upon as advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. All content was correct at the time of publishing. Legal advice should always be sought in relation to specific circumstances.