You’ve decided to buy a property with your partner or a group of friends. But how do you protect yourself if the worst happens and you’re forced to sell? A deed of trust, also known as a declaration of trust, can help.
In this article, we look at deeds of trust and whether they are legally binding.
What is a deed of trust?
A deed of trust – also known as a declaration of trust – outlines your rights and interests in a property. It’s a critical document if you’re buying with your partner or a group of friends because it outlines your financial contribution and share in any proceeds.
Arranging a deed of trust before you buy protects your financial interests from the beginning. Mortgage lenders are keen on deeds of trust because they provide financial clarity when multiple owners exist. If the property is later sold, a deed of trust will avoid disputes by detailing who should receive what.
Is a deed of trust legally binding?
A deed or declaration of trust can be legally binding, but only if it’s drawn up by a solicitor. Property owners must adhere to its contents as they delineate your rights and responsibilities.
A deed of trust establishes the terms of ownership and is particularly useful when buyers make an unequal financial contribution. The deed will specify each person’s share in the property, eliminating disputes if you’re forced to sell.
If you’re cohabiting or house sharing, a deed of trust can protect your financial interests if the relationship ends or you have a falling out.
Will I need a solicitor to draw up my deed of trust?
Don’t be tempted to use an online template for your deed of trust. This document won’t be regarded as legally binding and can’t be used if a dispute arises
A solicitor will determine if you’re tenants in common who own unequal shares or joint tenants who own an equal portion of the property. If the situation changes, you can rewrite the deed of trust to reflect your new status.