Buying property together: is a declaration of trust enough?

Buying a property is one of the most significant financial commitments you will ever make.

When you buy with a partner, friend or family member, it is essential to protect both your initial contribution and your ongoing investment.

Obtaining independent legal advice at an early stage helps ensure you are properly protected if circumstances change in the future.

How do you protect your property investment?

The starting point is usually a legal document known as a declaration of trust. This records:

• How much each owner has contributed
• The shares you each own
• What each of you will receive if the property is sold

While this document is important, a simple declaration of trust on its own is rarely sufficient to deal with the difficult and emotional situations that can arise later on.

Why is a declaration of trust alone not enough?

A properly drafted declaration of trust should be supported by wider legal advice and should address issues such as:

• What happens if one owner wants to sell and the other does not
• How mortgage payments, repairs, renovations and improvements are to be funded
• Whether one owner can force a sale
• What happens if the relationship breaks down
• What happens on death

Without this broader advice, you may find that your financial position is not as secure as you expect.

Death, Wills and inheritance

It is crucial to understand what happens if you or the other owner dies. You need clear and independent advice on:

• Whether you could be forced to sell or move out
• How the property passes under a Will or under the intestacy rules if there is no Will
• How any mortgage will be repaid and who is responsible for the debt
• The potential Inheritance Tax implications, which can have a significant impact

In many cases, you may need to make a new Will and share it with the other owner(s).

You may also be advised to review their Will, so everyone is clear about what will happen on death.

Marriage, civil partnerships and cohabitation

Different protections are needed depending on your relationship:

• If you are planning to marry or enter a civil partnership and want to protect your share of the property, a pre nuptial agreement should be considered
• If you are already married or in a civil partnership, a post nuptial agreement may be appropriate
• If you are not planning to marry or form a civil partnership, a cohabitation (living together) agreement is strongly recommended

These agreements can be critical in protecting your financial position.

Why does independent advice matter?

Declarations of trust are often prepared by conveyancing teams as a low cost add on, simply recording what each party has paid in and expects to receive on sale.

While useful, this approach does not provide the full protection most buyers need.

Buying or selling a home is already stressful, and legal advice can feel like an unnecessary expense.

However, relying on a basic declaration of trust alone can leave your hard earned investment exposed.

How can Morr & Co help?

If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Private Client team by emailing info@morrlaw.com or calling us on 0333 038 9100 and one of our team will be happy to assist.

Disclaimer
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.