What is a Deed of Trust and should you have one?

When you buy a property, the division of the asset is usually 50:50, meaning that each person named as ‘owner’ of the property within the Title Deeds owns an equal share of the property. This is typical for co-habiting couples and married couples and in such situations, there generally isn’t a need or desire for a Deed of Trust. There are however situations where individuals might wish for a Deed of Trust to be put in place. A Deed of Trust allows the parties to specify and agree upon how the ownership of the beneficial interest in the property might look.

Do I need a Deed of Trust?

You should consider a Deed of Trust if you wish to protect your interests and investments. Here are some of the situations where you might consider a Deed of Trust:

I’m buying a property jointly. Do I need a Deed of Trust?

If you are buying a property jointly, whether that be with a partner, a friend, or a business partner, a Deed of Trust would allow you to set out and agree your individual interests in the property. Often, when people buy a property together, one will contribute more than the other, often in the form of a deposit. A Deed of Trust would enable you to protect your contribution to the purchase so that in the event of any fall out or disagreement, your contribution is safe.

My partner is moving in with me. Do I need a Deed of Trust?

If you are already a homeowner and the property is registered in your sole name, then simply co-habiting will not usually pose a risk to your property investment (although this is whole other topic and sometimes your interest can be at risk). In the event of a breakdown of your relationship, in the absence of any formal, documented agreement, the sharing of any assets will not be required by law. This however differs were you to marry. If you are living together and unmarried and wish to protect your personal interests, then it’s advisable to make a Cohabitation Agreement (rather than a Deed of Trust). For more information on Cohabitation Agreements and the circumstances under which you might need one, please see this blog by Jane Auty, one of out Family Law Solicitors here at Thornton Jones.

I’m re-mortgaging my property and adding my partner to the Title Deeds. Do I need a Deed of Trust?

Whilst un-married couples who live together might benefit more from a Cohabitation Agreement, your need for a Deed of Trust will change should you choose to add your partner to the property Title Deeds, often done as part of a re-mortgage. At this point your partner, and now co-owner of the property, will have equal share in the property, unless specified otherwise and therefore any current and future equity. A Deed of Trust at this point would enable you to protect your stake in the property (essentially the equity built up over time whilst the property was in your sole name).

I am gifting a deposit to my child to help them buy a property. Is a Deed of Trust necessary?

Gifting money is bound by certain taxation rules so in the first instance, it’s best to seek advice on Estate Planning and how to be as tax efficient as possible. In general, your gift of a deposit would not necessitate the need for a Deed of Trust as it’s assumed that this is a gift and you are not expecting a return of this cash or any accumulation of proportionate equity. If, however, your gift is intended as a temporary loan and you wish to receive it back in the future, then you should consider a Deed of Trust, a private charge on the property, or a loan agreement  to protect your gift. In absence of a Deed of Trust, a charge or a loan agreement in this situation, your child has no legal obligation to return the gift.

I am separating and cannot afford to buy my ex’s share. How can a Deed of Trust help?

Often, when a married couple separate, there will be a need to either sell the matrimonial home or one person would buy out the other. Where the agreement is that one party will buy out the other, there would be a need for one person to re-mortgage the property, transferring the property into their sole name. This however can be tricky when affordability is considered by the mortgage company and, in some cases, the individual may be unsuccessful in securing a mortgage in their sole name thus making the ‘buy out’ not possible.

In this situation, and of course with all parties in agreement, both parties could remain named on the Title Deeds (as owners of the property) and the mortgage yet with a written agreement in the form of a Deed of Trust clearly stating key points such as:

a) What proportion of the property belongs to each party. This would usually be a sum of money, i.e. equity, and would usually be the sum of money agreed as the ‘buy out’ value.

b) Who is responsible for the ongoing mortgage repayments and any other home-ownership related costs such as utilities, Council Tax and maintenance costs with clauses that indemnify the departing party from any legal action associated with missed mortgage repayments for example.

c) A timeframe for when a re-mortgage must have taken place thus releasing the departing party from both the Title Deeds and mortgage with an agreement that after this timeframe, and if a re-mortgage is still not possible, that the property be sold.

This would usually sit alongside a consent order which attaches to the divorce to ensure all aspects of the couples finances are covered, not just the property in question.

Get in touch

There are several ways you can protect your interests and all largely depend on your personal situation. With option such as Cohabitation Agreements, Prenuptial Agreements and Deeds of Trust available, it’s wise to seek professional guidance on what is the right solution for you. Here at Thornton Jones we have a highly skilled and experienced Property Law and Family Law team who can learn more about your personal circumstances and advise on which route is best for you.

If you would like to discuss in more detail, then please call us at any of our four Yorkshire based offices to book an appointment.

☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Ossett office on 01924 586 466
☎️ Call our Sherburn in Elmet office on 01977 350 500

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