What is a deed of trust and why do you need one?

A deed of trust sets out who owns what if you buy a property with someone but contribute different amounts. Find out whether you need one and how to draw one up.

If you buy a property with someone, whether it’s your partner or a friend, and contribute exactly the same amount towards the deposit, buying costs, mortgage and ongoing expenses you’ll probably want the proceeds to be split between you equally if you sell it.

But if you put in different amounts – for example, one of you pays more of the deposit than the other, or one of you will be paying more of the mortgage, you may want this to be reflected in how the proceeds are divided. And if a third party, such as a parent, has contributed money to help with the purchase they may want to be sure of getting their money back when the property is sold.

This is where a deed of trust – also known as a declaration of trust – comes in. It’s a legally binding document you draw up when you buy the property to record how much each party has paid and set out who will get what if the property is sold or what will happen if one person wants to buy the other out. This helps to avoid disagreements later.

How a deed of trust works

There are two ways of jointly owning property – as joint tenants or tenants in common. If you are a couple you’ll probably want to go for joint tenants. This means you both own the whole property with no specific shares and if one of you dies the other person continues to own the whole property in their own right, regardless of how much each of you has contributed.

Alternatively, owning the property as tenants in common means you each own a share of the property and can leave your share to someone else in your will if you die – to children from a previous relationship for example. This is also likely to be the best form of joint ownership if you are buying with a friend or family member, such as a sibling.

If you have contributed different amounts towards the property, having a deed of trust in place ensures that you each receive the share of any sale proceeds that reflects this and that a fair price is paid if one of you buys out the other. It could also make things easier if you own the property with your partner and split up.

You need to be tenants in common to have a deed of trust. The document effectively changes the ownership of the property stated in the title deeds and should be registered at the Land Registry so that it’s publicly recorded and anyone buying the property can see what the situation is.

It also means that someone who has contributed money towards the purchase but is not recorded as an owner on the deeds gets legal protection and is guaranteed to receive their fair share of the property’s value when it’s sold.

Who is a deed of trust for?

A deed of trust is useful for anyone buying a property with someone else where the parties have contributed unequal amounts as it means this can be legally recognised. For example, if you put in 60% of the deposit and your partner puts in 40%, you can make sure you get 60% of the sale price if you split up and have to sell it. Or you might decide to divide any increase in the value equally if you have been paying the mortgage 50/50.

It’s also a good idea to have one drawn one up in any situation where someone has an financial interest in the property but isn’t named as an owner on the deeds – for example, when a parent gives money to their child to help them buy the property and wants to make sure they get their money back. They may also want only their child to benefit from the money and not their partner, especially if they split up.

Another situation where a deed of trust is worth having is if you are living with your girlfriend or boyfriend in a property they own and making a financial contribution, as you have no automatic rights to the property if you’re not married or in a civil partnership and split up.

How can you create a deed of trust?

It’s best to employ a solicitor or licenced conveyancer to draw up a deed of trust for you to make sure it’s done properly and that you have considered everything you need to.

If you’re doing it at the same time as buying the property, which is the safest option as the relevant parties’ interests are never at risk, you can have it drawn up by the property lawyer you’re already using for an additional fee. However, you can have one drawn up by another firm later at a fairly low cost.

The solicitor/conveyancer will create the document and the joint owners will then sign it. Aspects to consider including are how much of the deposit each person is putting in, the percentage share each person owns, how the money will be shared between you if the property is sold, how much each person will pay towards the mortgage and who will pay for renovations and repairs.

You can even include who is allowed to live at the property, how any income from the property, such as rent if it’s a buy-to-let property, will be distributed and what the property can be used for.

If you might end up putting more money into the property in uneven amounts in the future you can draw up a ‘floating’ deed where each person’s share is calculated using a formula at the time of any sale based on your total contributions up to that point. This makes it less likely that the deed will become out of date.

Just remember that the information will become public once the deed of trust is registered at the Land Registry so you may want to record some things privately.

Finder survey: What aspects of a mortgage matter most to Brits when choosing a one?

Overall cost46.69%44.02%
Initial rate37.2%34.51%
Whether there's an application fee18.83%22.55%
Customer service14.91%18.75%
Provider reputation18.67%17.12%
Don't know17.17%10.6%
I would not choose a mortgage13.7%15.22%
Source: Finder survey by Censuswide of 1032 Brits, December 2023
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