Trust Deeds

There are two different ways in which property can be owned jointly – either as ‘beneficial joint tenants’ or ‘tenants in common’. Both these methods of ownership mean that the property is owned jointly by two or more people but the way this is viewed by the law is quite different.
 

See Useful links for more information about joint ownership. If the way in which you choose to own your property as tenants in common then you should have a Trust Deed (sometimes called a Declaration of Trust) which records the arrangement between the joint owners. There are a few fairly common ways of setting out in a trust deed what is to happen to the sale proceeds when the property is sold.

  • One way is to state that each party has a percentage share each i.e. you might say that one person has a 30% share and the other has a 70% share and that if the property was sold then the money would be divided in that way. 
  • Alternatively you may say that one party is entitled to a fixed sum out of the sale proceeds with all the balance being payable to the other owner – in this way one person has the benefit of all the potential increase in value (and also bears the risk of the potential reduction in value) whilst the other persons share is fixed irrespective of the property value.
  • Thirdly you could have a combination of the first two.

You also need to consider whether there is a mortgage on the property. If there is, then the trust deed should provide for this to be paid off before dividing the sale proceeds, or if one party is to be responsible for all or part of the mortgage capital payment out of their share then this should be stated. Further, the trust deed should go on to define the proportions in with the joint owners would make the mortgage payments.

As a further option you may wish to consider whether the document should contain a right of first refusal in the event of one party wishing to dispose of their share in the property. This is called a right of pre-emption. The arrangement would be that if one party wished to sell the property they would first give notice of this intention to the other parties who would have the right to buy that persons share at market value.

If you would like some guidance in choosing which trust deed suits you best then try our Trust Deed Selector, see Useful links.

Trust Deed
Where the shares in the property are agreed as percentages. Property subject to a mortgage.
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£20.00
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Trust Deed
As above but including a right of pre-emption (first refusal).
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£25.00
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Trust Deed
Where the shares in the property are agreed as percentages. No mortgage on property.
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£20.00
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Trust Deed
As above but including a right of pre-emption (first refusal).
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£25.00
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Trust Deed
Where one party’s share is a fixed sum of money irrespective of the value of the property. Property subject to a mortgage.
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£20.00
Buy now
Trust Deed
As above but including a right of pre-emption (first refusal).
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£25.00
Buy now
Trust Deed
Where one party’s share is a fixed sum of money irrespective of the value of the property. No mortgage on property.
Download Now
£20.00
Buy now
Trust Deed
As above but including a right of pre-emption (first refusal).
Download Now
£25.00
Buy now
Trust Deed
Where one party’s share is a fixed sum of money irrespective of the value of the property and the balance is divided in accordance with agreed percentages. Property subject to a mortgage.
Download Now
£20.00
Buy now
Trust Deed
As above but including a right of pre-emption (first refusal).
Download Now
£25.00
Buy now
Trust Deed
Where one party’s share is a fixed sum of money irrespective of the value of the property and the balance is divided in accordance with agreed percentages. No mortgage on property.
Download Now
£20.00
Buy now
Trust Deed
As above but including a right of pre-emption (first refusal).
Download Now
£25.00
Buy now

Our trust deed templates assume that the arrangement is between two people - but with a little adaptation can be made to suit a situation involving more than two parties - if you would like assistance with a more bespoke template then please email us with your requirements and we will let you have a price for a one off template.If you are interested in a trust deed relating to a property held in the sole name of one party see Useful links.

You should also consider whether the transaction constitutes a disposal of an interest in land for Stamp Duty Land Tax purposes. If the trust deed is simply recording the existing position then it would not constitute a disposition. If though you are using it as a device to transfer a share in ownership then it would.

Stamp Duty Land Tax (SDLT) - in relation to trust deeds
An SDLT return has to be submitted where there is a transfer of an interest in land and the consideration exceeds £40,000.  Gifts are not caught by this but remember that if a property is mortgaged then this will be taken into account e.g. if a half share in a property is transferred subject to a mortgage then the presumption is that the person receiving the benefit of the property is also taking on half of the mortgage debt (of course this presumption could be rebutted by express words in the declaration).

Scenario 1
Property in sole name but purchase price contributed to by two people and trust deed declares it is held for the benefit of them jointly in the shares in which they contributed - either with or without mortgage.

  • No SDLT return is required - there is no transfer of any interest in the property - the trust deed simply records what has been done. Any SDLT return would have been dealt with in connection with the purchase.

Scenario 2
Property in sole name of X. Free of mortgage. X gifts a half share to Y and enters into a declaration of trust to record that the property is now held for X & Y jointly.

  • No SDLT return is required - the transfer is by way of gift.

Scenario 3
Property in sole name of X. Free of mortgage. X transfers a share to Y in consideration of a payment by Y and enters into  a declaration of trust to record that the property now held for X & Y jointly.

  • If the payment is less than £40,000 then no SDLT return is required.
  • If the payment exceeds £40,000 then an SDLT return is required. No tax is payable though unless  the current threshold is exceeded (£125,000 for residential properties)

Scenario 4
Property in sole name of X. Subject to a mortgage. X transfers a share to Y in consideration of a payment by Y and enters into  a declaration of trust to record that the property is now held for X & Y jointly.

  • If the payment plus 50% of the mortgage debt is less than £40,000 then no SDLT return is required.
  • if the payment plus 50% of the mortgage debt exceeds £40,000 then an SDLT return is required. No tax is payable though unless  the current threshold  is exceeded (£125,000 for residential properties).

If it is necessary to complete a return and submit this to the HM Revenue & Customs then the main form is SDLT1 and sometimes a supplementary form SDLT4 see HMRC Stamp Duty Land Tax in Useful links. If you have any concerns about this you should refer to the HMRC website or telephone their help line on 0845 603 0135.

The above is a very brief summary of the main SDLT requirements in so far as they might affect a declaration of trust - if you have any concerns you should should check with HM Revenue & Customs.

Trust deeds are designed to regulate the position over the amount and distribution of the equity in the property. If you want to go further and have an agreement that deals with the regulation of the day to day relations between cohabitees then you need to have a cohabitation agreement – see Useful links for more information.

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The documents available on this site have been prepared for use in England & Wales. They may not be valid if used in other areas.