The Importance of Declarations of Trusts and Wills when purchasing a property
In today’s market with first time buyers struggling to get onto the housing ladder, saving to buy a house is often a very long and drawn out process and may also involve the “bank of mum and dad” offering a helping hand.
After spending so many years saving, it is important to consider how you can protect your investment, particularly as unmarried couples often contribute different amounts towards the initial deposit and may also wish to contribute different amounts towards the mortgage repayments.
Unless there is any documentation to the contrary, it is assumed that the property is owned equally between you, which means when the property is eventually sold you will each receive back equal amounts. Trying to assert a different split a long time down the road may be very difficult.
It is, therefore, essential that your intentions are clearly set out in a Declaration of Trust, so in the event of a breakdown in your relationship, it is clear what each party should receive when the property is sold. In particular, if your parents have gifted money to you, they will want to ensure it is not lost to your partner in the event of a split.
A Declaration of Trust can be prepared to fit your requirements and can include provisions such as how the property is held between you and how any proceeds of sale should be split, how you wish to split the mortgage repayments and maintenance costs. It can also include a procedure for the valuation and sale or transfer of the property in the event that things become difficult between you.
The Declaration of Trust should also be backed up with a restriction registered at H M Land Registry, in order to make it clear to third parties (for example, a solicitor acting in the sale of the property) that there is a Declaration of Trust in place and that the proceeds of sale should be split accordingly.
Finally, it is important to consider what will happen if one of you were to die. Without having a Will in place it is likely that person’s share of the property will pass to their family, under the intestacy rules (see here), and not to your surviving partner, which may not be what you want.