As many people will see from reading my website, Declarations of Trust are used to protect people who buy property. But many people don’t really know much more than that. I have listed out some of the things that can or should be included within a Declaration of Trust:
• If owners of property have put in different amounts when the property is purchased, these sums must always be stated in a Declaration.
• Declarations can confirm that any increase in value of different amounts of investment, will be reflected in the division of “profit” upon sale.
• In some cases not all the owners are listed on the Title Deeds. In such a case a Declaration can state who all the owners of the property are.
• Where there are more than 4 owners, a Declaration will confirm all the owners of the property. This is essential for the protection of any “additional” owners (as only 4 names can be on the Title Deeds).
• Where one owner pays the mortgage this should always be explained, and should be reflected in the final distribution of the net proceeds of sale.
• If there is an agreement that the owners will hold the property in differing proportions, this will be stated.
• As to what will happen to an owner’s share/interest in the property on death, should always be covered in the Declaration.
• Where one buyer wants to sell his/her share/interest in the property an option to purchase for the other owners can be included. I cannot recommend how essential it is to put this framework in place, as it allows for the situation when owners fall out.
• Declarations can detail the procedure should further loans be taken out on the property. If this is desirable all the owners must be notified in writing, and any loan must have the consent of all the owners.
• In cases where additional loans against the equity of the property are to be prohibited. This must be expressed in the Declaration.
• Where a parent is assisting with the property purchase, a separate Loan Agreement should be put in place in relation to the loan.
• Where there is any bank borrowing to fund the purchase. The amount loaned and the banks’ details must always be expressed.
In short a Declaration of Trust is tailored to your own special set of circumstances. This means that no one Declaration is the same as another. Think of it as the ultimate “pre-nuptual”! But rather than organising your assets before marriage. You are ensuring everything is in order before you buy the most substantial asset you will ever own!