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What is a declaration of trust and do I need one?

Tim Heming
Written by  Tim Heming
Jonathan Leggett
Reviewed by  Jonathan Leggett
5 min read
Updated: 08 Apr 2024

A declaration of trust could be a vital legal document if you are about to buy property with someone else. Here we explain what it is and how it works

What is a declaration of trust?

A declaration of trust is a legally binding document that outlines the ownership rights and interests of all parties in a property.

It's commonly used in situations where multiple individuals contribute financially to the purchase of a property, but want to clarify their respective shares and responsibilities.

It specifies:

  • Each party's share of ownership

  • Rights to occupy the property

  • Responsibilities for maintenance and expenses

  • Procedures for selling or transferring ownership

A declaration of trust helps prevent misunderstandings or disputes by providing clarity on the ownership structure.

It's particularly important in situations such as cohabiting couples, friends, or family members purchasing property together, ensuring fair treatment and protection of each party's investment.

Do I need a solicitor for a valid declaration of trust?

While it's possible to create a declaration of trust without a solicitor in the UK, it's highly recommended to seek legal advice.

The advantages of using a solicitor include:

  • Ensuring the document adheres to legal requirements

  • All parties' intentions can be accurately reflected

  • All potential future scenarios can be considered

  • Guidance can be given on drafting, interpreting complex legal language, and registering the declaration if necessary

  • It helps safeguard against misunderstandings or disputes, providing peace of mind and legal validity to the declaration of trust

Why might I need a declaration of trust?

There can be several reasons you might need a declaration of trust when buying your first home. Here are three of the most common examples.

  • Investing with a friend. If you're buying a house with a friend and you're putting in different amounts of money, a declaration of trust can say how much of the house each person owns. It helps avoid arguments later about who gets what if you sell the house

  • Buying with a partner. If you're buying a home with your partner but one of you is paying more towards the deposit, a declaration of trust clarifies how ownership is shared. It can help ensure fairness if you split up or sell the house in the future

  • Parent helping with a deposit. If your parents are giving you money for a house deposit, a declaration of trust can state if it's a gift or a loan. This protects everyone's interests and avoids confusion about ownership if circumstances change

When is the right time to put a declaration of trust in place?

Addressing ownership shares and responsibilities upfront avoids disputes later, so it's advisable to finalise the declaration of trust before completing the purchase to ensure clarity and protection for all parties involved.

How much does it cost to get a declaration of trust?

Fees for a declaration of trust will vary between firms and depend on the complexity of the deed.

It’s always worth shopping around and getting accurate estimates from solicitors before proceeding because it is rarely a one-size-fits-all solution.

Does a declaration of trust need to be registered with HMRC?

The need for registering a declaration of trust with HMRC depends on its specific terms and the parties involved.

In particular, registration with HMRC is necessary when legal and beneficial ownership differ.

  • Legal ownership refers to the person or entity whose name is officially registered on the property title deed. They have the legal right to control, use, and sell the property

  • Beneficial ownership refers to the individual or individuals who enjoy the benefits of ownership, such as receiving rental income or living in the property, even though their name may not be on the title deed

Other situations may also require HMRC registration, so discuss with a solicitor if it is necessary.

Does a declaration of trust go on a Land Registry?

A declaration of trust doesn't go directly on to a Land Registry. However, you can lodge a restriction on the property's title deeds to signify the existence of a declaration of trust.

How long does it take to complete a declaration of trust?

The time to complete a declaration of trust in the UK varies depending on factors such as complexity, legal advice sought, and parties involved.

It can typically take several days to weeks to draft the document, discuss terms, and finalise agreements.

Legal professionals often facilitate the process, ensuring accuracy and adherence to legal requirements, which can affect the timeframe.

Does a marriage or civil partnership override a declaration of trust?

A declaration of trust is legally binding, but a family court may still disregard this when dividing financial assets in divorce proceedings.

This doesn’t mean a declaration of trust isn’t worthwhile. It still gives owners protection and courts direction, which should be reassuring if there is animosity between owners who have split up.

Does a declaration of trust sever a joint tenancy?

Yes, a declaration of trust does sever a joint tenancy, leading to two or more individuals owning the property as tenants in common, rather than a joint tenancy.

Owning property as tenants in common means each owner has a specific share. When one owner dies, their share goes to their chosen beneficiaries, not automatically to the other owner or owners.

In contrast, owning property as joint tenants grants equal rights, and on death, the property passes automatically to the surviving owner or owners.

If I pay for all the building work upgrades to a house can I own a bigger share of the property?

If a declaration of trust is in place, it can be amended to reflect the initial investment you have put into property as long as all parties agree.

Additionally, a supplementary declaration of trust can be made that refers to the original document, outlines what has happened since, and what the shares are now.

Can a declaration of trust be backdated?

It might be possible to backdate a declaration of trust, but only in specific circumstances and it would be wise to seek legal advice before proceeding.

What impact does a declaration of trust have if one of the property owners dies?

A declaration of trust can have an influence on the administration of the estate when one of the property owners dies.

Because a declaration of trust severs any joint tenancy that might have been in place when it is set up, the deceased's share of the property instead passes to their named beneficiary in the will.

Without a will, intestacy rules apply. For example, with no will the whole estate passes to the children in equal shares. Importantly, the deceased's share doesn't automatically go to other owners, unless it's stated in the deceased's will.

This means unmarried couples owning as tenants in common need wills to prevent conflicts, as intestacy rules may lead to the deceased's partner not inheriting their share, potentially causing disputes.

Will a declaration of trust affect my mortgage?

While many mortgage lenders require the declaration of trust be reported, it is rare that lenders have any issue with this.

Let your conveyancer or solicitor know if you have a declaration of trust in place.

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