A joint ownership trust deed or legal Declaration of Trust Deed is an agreement between the joint owners that covers all the details of who owns what in a property and importantly what happens when a joint owner wishes to move on.
A declaration of trust deed, or joint ownership trust deed will protect all the owners in property by clearly spelling out ownership rights. It will set out the share of equity to which each owner is entitled on sale. It is entirely up to the owners how they want to work their final shares out when they come to sell, or terminate the arrangement. In addition to the initial contributions made to the purchase price, it can also incorporate reference to differing contributions to mortgage payments, household bills or maintenance costs.
Accurate and open records must be kept of all household costs so that when you come to terminate the mortgage, you will be able to see exactly what your shares should be.
When drawing up a legal declaration of trust deed, or declaration of trust with your prospective purchasing partner(s) be reasonable and discuss and settle any possible areas of dispute at the outset. Absolute clarity at the outset is the basis of a successful joint property purchase. You may want to set up a joint bank account from which the mortgage payments and perhaps other household expenses are paid.
You will need to discuss with your partner or partners:
- What ‘share’ of the mortgage is each party going to pay and how the equity is split based on payments into the mortgage when you come to terminate the mortgage or sell the property.
- Home insurance: this will include insurance for the actual building, the bricks and mortar, and separate insurance for your furniture and possessions (contents insurance).
- Purchasing costs such as Stamp Duty, Solicitors’ fees, and searches, survey fees.
- Records of expenses on the house. House maintenance (decorating costs, roof repairs, etc) and any agreed improvements such as a conservatory, extension or new windows.
- Other insurance cover including mortgage payment protection and critical illness protection.
- How to value the house if one of you wants to sell.
- What happens if one of the joint owners loses his / her job and is unable to keep up with payments. How will the shortfall be met and how will this affect the ownership of the property. Will the affected owner be able to move out and a tenant found to make up the shortfall and how will this tenant be selected.
- Splitting the goods and chattels purchased jointly.
- What happens if one of you dies.