Declaration of Trust

What it is

A document recording the beneficial ownership of a property. The register at HM Land Registry shows who holds the legal title. It says nothing about who owns what underneath. A declaration of trust fills that gap and makes it enforceable.

Typical uses: unequal deposits, a parent helping with a purchase, buying with a friend or a sibling, a partner moving into a property one of you already owned, and a home paid for by one person but registered in both names.

How it works

• It records the shares, and how they are worked out. That can be fixed percentages, or a formula that reflects who actually paid what.
• It sets out who pays the mortgage, the outgoings and the repairs, and whether those payments change the shares.
• It says what happens if one owner wants out, if the relationship ends, or if one owner dies.
• Where a property is held as tenants in common, a restriction is entered on the title so that a buyer cannot simply deal with the survivor.

What happens if you do nothing

Two things, and both are avoidable. First, if you hold as joint tenants and one of you dies, the whole property passes automatically to the survivor and never reaches the Will at all, whatever the Will says. Second, if you sever a joint tenancy without documenting the shares, severance produces equal shares regardless of what each of you actually contributed. Turning that into unequal shares afterwards is treated as a further gift by whoever is giving value up.

If the money came from a parent and there is nothing in writing, the argument after a death is about whether it was a gift, a loan or a share. That argument is expensive.

Where specialist advice matters

• Once the legal owners and the beneficial owners stop matching, the resulting trust of land usually has to be registered with HMRC.
• There can be Stamp Duty Land Tax consequences to changing beneficial shares, particularly where a mortgage is involved.
• If the property is unregistered, the position needs recording differently and first registration should be considered.
• Where two people want advice on the same property, their interests may not be identical, and we will tell you if separate advice is the right course.