Deed of Trust to Protect Money In Property
06/11/2019
2,362
7 min read
A deed of trust is primarily used to protect money in a property, however it can also be used to set out the intentions for the ownership of the property including its use, maintaining it and when to sell it.
A deed of trust is drafted by a solicitor, normally during the conveyancing process when buying, however you can draft a deed of trust after you purchase. You can only have a deed of trust to protect your money in a property if you hold it as tenants in common.
The cost to prove how much you are owed from a property can go into the tens of thousands, so it is advisable that all joint owners of property draft a deed of trust to confirm what they own and how they can get their money when they want to. The money in the property is better known as your beneficial interest in the property and it is shown as a percentage.
What happens if joint owners don't have a deed of trust?
Much like any financial agreement, if it isn't written down on paper, signed and witnessed, it is for the parties to prove how much money they are due from the property. It can be very costly to prove how much money you are owed and often requires legal support through mediation or even going to court.
Where there is no express deed of trust that confirms the money share, beneficial interest, of the joint owners - which if there is then this is indisputable - then the co-owners must look to prove their ownership in the property. If the property is held as joint tenants then it is shared equally and this is unchangeable. If the property is held as tenants in common then the joint owners can look to prove what money they have invested, what their original intention was and then look to agree a beneficial interest share. It may even be the case that the parties look to force a sale to get their money from the property.
What money can be protected?
Deeds of Trust can protect more than just the original deposit invested on purchase. This can include:
- Purchase Deposit - each joint owner's deposit used when buying the property can be protected.
- Mortgage Repayments - the joint owners can agree to share the mortgage repayments in unequal shares to allow them to grow a greater beneficial interest in the property.
- Renovations - you can agree about how renovation works, how you contribute toward any and how they can increase your individual financial stake in the property. Read more about what renovation works add value to your home.
- Household bills - agree who pays for what household bills.
Within the deed of trust you can state how each of the above effects your beneficial interest, in essence what money you get on sale of the property. Some standard deed of trusts will just have a fixed percentage sharing the beneficial interest 50%/50% or 70%/30%, however there are more complex agreements such as a floating deed of trust that allow for the beneficial interest in the property to increase or decrease reflecting the joint owners' contributions to the property. We explain more about floating deeds of trust here.
How to get a deed of trust?
We offer a number of different deed of trusts based on the circumstances of the joint owners. These include:
- Deed of Trust for buying a home for anyone looking to declare their individual beneficial interest and confirm their intentions such as how to sell the property or what happens if you break up
- Deed of Trust for Tax Purposes for a landlord sharing property income in a tax efficient way with their partner (if married, to be filed alongside a Form 17 declaration to HMRC). If this is a property you already own as joint tenants then we can help sever the joint tenancy
- Silver Deed of Trust (Floating Deed) for joint owners looking for a floating beneficial interest that goes up and down during the life of the ownership and reflects what you put in including mortgage repayments, costs of purchase/sale and developments (click here to find out more)
- Deed of No Beneficial Interest for clients buying with a joint mortgage sole proprietor mortgage product where they need to declare a zero beneficial interest to avoid second home stamp duty tax
Our deed of trust solicitors* drafted deed of trust is delivered quickly and at low fixed cost. You can call and talk through your intentions with one of our specialists on 0333 344 3234 (local call charges apply) or click the link below to get a quote.
- Speak to our specialist about what you want to do
- Drafted by an experienced solicitor
- Deed emailed within 24-48 hours
- Competitive prices
Can a deed of trust be back dated?
A deed of trust cannot be backdated and only comes into effect once it has been executed and dated at the point of execution. The deed is also witnessed and the witness cannot benefit from the transaction so a friend, neighbour or colleague is always best.
Can a declaration of trust be revoked?
The joint owners can revoke a deed of trust with a view to:
- changing from tenants in common to joint tenants - this may be linked to the joint owners getting married and wanting to benefit from being joint tenants. We explain the process in this article - Change from tenants in common to joint tenants
- changing beneficial interest for tax purposes - often married couples will change their beneficial interest in a buy to let property so that they can share their income in a tax efficient way. If there is a deed of trust then the deed of trust must be revoked and then a new deed of trust/assignment is drafted to reflect the new beneficial share. If the joint owners are married then this needs to be reported to HMRC using Form 17.
How to get your money from the property?
The process of selling or transferring the property in order to get your money, your beneficial interest, from the property requires mutual consent that can be pre-agreed in a deed of trust. By doing so this frees up the joint owners to be able to exit the property using the pre-agreed process. The challenge arises where the co-owners don't have a deed of trust and are then find themselves stuck looking to force the sale. We examine in detail how to do that here - Can I force the sale of a jointly owned property?
Examples of how to protect money with a deed of trust
- 1
Fixed Shares
Dave and Jane buy a property together. They both pay equal shares of the deposit and agree to share the mortgage repayments 50/50. They draft a Deed of Trust that states Dave owns 50% of the beneficial interest and Jane owns 50%. This means that on sale, after the mortgage has been repaid in full and the costs of sale deducted (such as conveyancing fees and estate agent costs) then the net sale proceeds are split equally.
- 2
Return Deposit and Share Gain 50/50
Michelle and Lucy buy a property together. Michelle is paying all of the deposit however Lucy and Michelle are paying the mortgage repayments equally. They draft a Deed of Trust that confirms Michelle receives her deposit back first from any net sale proceeds and then the balance is shared equally between Michelle and Lucy.
- 3
Floating beneficial share
Kevin and Julia buy a property together. They are both putting in deposits but in unequal amounts. They are also looking to share the mortgage repayments in unequal shares and may look to undertake development works. They draft a deed of trust that sets out these intentions and allows either party to increase their beneficial interest in the property by paying more of the deposit, mortgage repayments and renovations.
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