Where land is owned by two or more people, they each have a simultaneous interest in the land and are known as “co-owners”.
There are two ways in which co-owners may hold property:
– As joint tenants – Under a joint tenancy, each tenant has an indivisible share in the property and all of the tenants are equally entitled to the whole property.
– As tenants in common – If co-owners hold the property as tenants in common, they each have a distinct beneficial share in the property. It is advisable for the co-owners to indicate expressly the proportions in which they hold the property, rather than leaving this to be implied from the circumstances and the financial contributions made by each co-owner. A Declaration of Trust can be used to demonstrate how the property is held by the different co-owners.
A declaration of trust is a legal agreement between the joint owners of property. It may include several pieces of information, such as the amount each owner contributed towards the purchase price, their respective ownership shares, and what happens if someone dies or wants to move out or there is a dispute about how to develop the property.
When is it advised to have a declaration of trust?
If you are buying a home with your partner or friend, and you are purchasing the property as tenants-in-common, then you should speak to your solicitor and get a deed of trust drawn up. It may not be exactly romantic, but it could spare you a lot of pain if you ever decide to go your separate ways.
What are the benefits of having a declaration of trust?
If one of you has contributed more money towards buying the property, you may decide that it is fairer to reflect this in your share of the property for example – where one owner paid 30% towards the purchase price and the other paid 70%, each party to the transaction will hold a fiscally apportioned interest in the property according to their contribution.
In addition, if the property is owned as a tenancy-in-common and one of you dies, that share will pass in accordance with the terms of the deceased’s will (or under the rules of intestacy, if they don’t have a will). This means that the surviving joint owner of the property will have no control over who owns and lives in the co-owner’s part of the property. A deed of trust can be drafted to avoid this problem by stipulating exactly what should happen to the property if a joint owner dies.
If you have any questions or concerns about your contribution to a purchase, or think that you might benefit from a Declaration of Trust, you are more than welcome to contact the solicitor dealing with your file. They will be very happy to assist you and will be able to answer any queries you might have.
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