What is a deed of trust?
A deed of trust is drawn up by joint buyers if they want to divide the ownership of a property in a way that is not a simple 50/50 split. It is a legal agreement that reflects each owner’s financial contribution, and offers security to joint owners of a property if their circumstances change.
What is a deed of trust on a house?
A deed of trust is a legal document that clarifies the share of ownership of a house. If two people purchase a property together, they can either buy as ‘joint tenants’ or ‘tenants in common’. Joint tenants own equal shares of the property, but tenants in common can specify how much of the property each party owns. When the house is sold, they would each get the proceeds of their share, or if one party dies, the benefactors in their will would inherit their share.
Why do I need a deed of trust and how do they work?
You may be buying a house with a friend, or as a cohabiting couple. To finance the property each party may have raised different amounts to a deposit or be contributing different mortgage payments. Couples may be worried what might happen if their relationship ends. A deed of trust is a formal way of agreeing that in the event of the property being sold, each party receives a specific financial share of the proceeds. The deed acts as a safeguard, so that misunderstandings and disagreements are avoided in the future.
How much does a deed of trust cost?
Deeds of trust are prepared by a conveyancer. Deeds of trust can cost anywhere between £100 and £1000, depending on the conveyancer or how the deed is arranged. If it is part of the package of legal work undertaken by a conveyancer before a property purchase, a deed of trust is likely to be less expensive than if done on a standalone basis.
Deed of Trust vs Mortgage
A deed of trust is not the same as a mortgage. A mortgage is conducted between two parties, the mortgage lender and the borrower. A deed of trust is arranged between each of the future co-owners of a property, and any third parties who also have a share in the property. Mortgage lenders would only need to know about a deed of trust if a third party who isn’t on the mortgage (such as parents who may have gifted money towards a deposit) has a financial interest, stake or share in the property.
Is a Deed of Trust the same as a Declaration of Trust?
The two terms are sometimes used interchangeably, but they are not the same. A Declaration of Trust is not a legal document, and it does not need to be witnessed. A Declaration of Trust simply states who are the beneficial owners of a property; it is contained within a Deed of Trust, but is not legally binding by itself.
What are the key elements in a deed of trust?
In writing a deed of trust, the following information is included:
- Names of the parties with a stake in the property
- Their contributions towards the purchase price, purchase costs, and any renovations or improvements to the property
- Each party’s share in the property
How can I get a deed of trust?
A conveyancing solicitor will be able to draw up a deed of trust in advance of a property purchase.
Can I get a deed of trust after purchase?
Yes, deeds of trust can be arranged at any time during the ownership of a property. A current valuation of the property is required, which all the signatories should agree on.
Who can witness a deed of trust?
Anyone over the age of 18, with full mental capacity, and who is not related to any of the signatories, can witness a deed of trust. The deed of trust is not legally binding until the signatures are witnessed.
Does a deed of trust need to be registered at the land registry?
No, a deed of trust does not have to be logged on the title deeds. It is entirely up to the signatories to the deed of trust whether it is registered with the Land Registry. If it is this means that the property can only be sold with the consent of the people named in the deed of trust.
Can I change a deed of trust?
Yes, amendments can be made to a deed of trust. Minor variations can be added to the document, but for any significant changes, it is usually advisable to have a new deed drawn up.
What happens to a deed of trust when someone dies?
The deed of trust will usually include a clause that stipulates what happens in the event of the death of a signatory. Reference is made to the Will of the deceased, which override the terms of the deed of trust. The other signatories to the deed will have to abide by the terms of the deed, the late person’s Will or the intestate rights of their next of kin.
What happens to a deed of trust when someone gets married?
A deed of trust can still provide an indication of a signatory’s intentions, but when a couple get married, the deed will in legal terms be superseded by the Matrimonial Causes Act 1973. A married couple can consider getting a pre-nuptial or post-nuptial agreement, which can be contrary to the terms of the Matrimonial Causes Act.
Let us value your property
If you are thinking of drawing up a deed of trust, we can help by providing a valuation of the property. Simply get in touch with your local haart branch.