When purchasing a house with someone else, obtaining a Deed of Trust is advisable. This legal document outlines the ownership proportions of the property each owner’s financial contribution. It provides security for all joint owners if their circumstances change.
What is a deed of trust on a house?
It is a legal document defining a house’s ownership shares. When two people purchase a property together, they can do so as “other “joint tenants” or “tenants in common.”
Joint tenants own equal shares of the property, meaning each party has the same percentage of ownership. In contrast, tenants in common can specify the rate of each person’s property.
Both parties will receive proceeds based on their ownership share when the house is sold. If one of the owners passes away, their share will be inherited by the beneficiaries named in their Will.
Why do I need one, and how do they work?
You can purchase a house with a friend or as a cohabiting couple. Each party may have contributed different amounts for the deposit or may pay different amounts towards the mortgage. Couples often worry about what will happen if their relationship ends. It is a formal agreement outlining how the proceeds from the property sale will be divided. This document ensures that each party receives a specific financial share, helping to prevent future misunderstandings and disagreements.
How much does a it cost?
A conveyancer is responsible for preparing deeds of trust. The cost of these deeds can range from £100 to £1,000, depending on the conveyancer and how the deed is structured. Suppose the deed of trust is included as part of a package of legal services a conveyancer provides before a property purchase. In that case, it is likely to be less expensive than if completed as a standalone service.
Deed of Trust vs Mortgage
A deed of trust is different from a mortgage. A mortgage is an agreement between the lender and the borrower. In contrast, a deed of trust involves all future co-owners of a property and any third parties with a financial interest in that property. Mortgage lenders typically only need to be aware of a deed of trust. There are third parties, such as parents who have contributed funds for a deposit, who have a financial stake or interest 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 does not require witnesses. It merely indicates who the beneficial owners of a property are. This declaration is included in a Deed of Trust but is not legally binding.
What are the key elements in a deed of trust?
When drafting, it is essential to include the following information:
- The names of all parties with an interest in the property.
- Their contributions toward the purchase price, closing costs, and any renovations or impparty’sts to the property.
- The share of the property that each party holds.
How can I get a deed of trust?
A conveyancing solicitor can prepare a deed of trust before purchasing a property.
Can I get one after the purchase?
Deeds of trust can be arranged anytime during property ownership, provided all signatories agree on a current property valuation.
Who can witness a deed of trust?
Any person over 18, with full mental capacity, and not related to any of the signatories can witness a deed of trust. It is not legally binding until the signatures are witnessed. We are happy to witness signatures as long as we are not being asked to offer advice on the nature, impact, or accuracy of the document itself.
Does it need to be registered at the land registry?
A deed of trust does not need to be recorded on the title deeds. It is entirely up to the signatories of the deed to decide whether or not to register it with the Land Registry. If they choose to register it, the property can only be sold with the consent of those named in the deed.
Can I change a deed of trust?
Yes, it can be amended. Minor changes can be made to the document, but for any significant modifications, a new deed should be created.
What happens to a deed of trust when someone dies?
The deed of trust generally includes a clause outlining what occurs if a signatory dies. In such cases, the Will of the deceased precedes the terms of the deed of trust. The remaining signatories must adhere to the stipulations of the personal provisions of the deceased’s Will or the intestate rights of the next of kin.
What happens to a deed of trust when someone gets married?
A deed signatory shows a signatory’s intentions; however, once a couple gets married, the deed is legally superseded by the Matrimonial Causes Act 1973. To address their financial arrangements, a married couple may consider a prenuptial or postnuptial agreement, which may contradict the provisions of the Matrimonial Causes Act.
Are Deeds of Trust common?
Recent research conducted by Zoopla in 2022 revealed that over a quarter (27%) of individuals who purchased a home together and later separated felt they did not receive a fair share of the proceeds from the sale. Among those respondents, nearly seven in ten (72%) stated that their partner received more than their fair share or that they were mistreated. In contrast, the remaining 28% acknowledged receiving more than they deserved.
Many individuals depend on selling their property to finance their future living arrangements after a breakup. 37% of respondents reported having no personal savings when they ended their relationship, rising to 46% for women.
Despite this dependency, only 15% of people took out a deed of trust to safeguard their financial interests. Additionally, 7% had a property breakup plan in their prenuptial agreement.