Deed of Trust

A deed of trust, sometimes called a declaration of trust, is a legal document that records people's financial interests in a property.^{[2]HM Land Registry}

It can explain:

• who has a financial interest in the property
• what percentage or amount each person owns
• how the deposit and mortgage payments are divided
• who pays for repairs, improvements and other costs
• how any increase or loss in the property's value will be shared
• what should happen if the property is sold
• what happens if one person wants to leave or buy out the other
• how disagreements should be handled

The people named on the legal title and the people who benefit financially from the property are not always the same.

People may consider a deed of trust when:

• buying a home with a partner, relative or friend
• contributing different amounts towards the deposit
• one person is paying more of the mortgage
• a parent or relative is helping with the purchase
• someone contributes money but is not named as a legal owner
• the owners want to record unequal shares
• an existing financial arrangement has changed
• the property is being bought as an investment

A deed of trust should clearly reflect what everyone has agreed. Independent legal advice can be especially important when one solicitor cannot fairly advise everyone involved.

In England and Wales, joint property owners usually hold their beneficial interests in one of two ways.^[1]GOV.UK

Joint tenants

The owners normally have equal rights to the whole property. If one owner dies, their interest usually passes automatically to the surviving owner.

Tenants in common

Each owner can have a separate share, such as 50/50, 70/30 or another agreed division. Their share does not automatically pass to the other owner when they die. It can instead pass under their will or the rules of intestacy.

A deed of trust can record the shares held by tenants in common.

Encourage people to discuss:

• how much each person is contributing
• whether shares are fixed or may change
• responsibility for mortgage payments and household costs
• repairs and home improvements
• whether anyone can rent out the property
• how the property will be valued
• what happens if somebody wants to sell
• how one owner could buy out another
• what happens after separation, illness or death
• how disputes will be resolved

Everyone should read the complete document and understand it before signing.

A deed of trust does not remove anyone's responsibilities under a mortgage.

Someone named on a joint mortgage may still be responsible for the whole mortgage debt if the other borrower does not pay. People should speak to their lender and solicitor before changing ownership arrangements. Lender consent may be required.

A deed of trust can affect Income Tax, Capital Gains Tax, Inheritance Tax and property taxes. The effect depends on the property, how it is used and the circumstances of the owners.

Married couples and civil partners who jointly own income-producing property are normally taxed equally on its income. If their true beneficial ownership is unequal, they may need to submit HMRC Form 17 with evidence of those unequal shares. Form 17 has strict rules and time limits.^[3]HMRC

Not everyone needs Form 17. Please obtain advice from a solicitor, accountant or qualified tax adviser about your own situation.

Some property co-ownership trusts are excluded from the Trust Registration Service when the trustees and beneficiaries are the same people. Other arrangements may need registering.^[4]GOV.UK

Please use the official GOV.UK trust-registration checker or obtain professional advice rather than assuming that your trust is exempt.

Property and trust law are different in Scotland and Northern Ireland. A document written for England and Wales may not be suitable there.

People in Scotland or Northern Ireland should consult a solicitor qualified in the relevant part of the UK.