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What is a Property Deed of Trust?

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In the modern day, buying a house alongside someone else is a much more affordable method of getting onto the property ladder. It is becoming increasingly rare for first-time buyers to purchase a house on their own – and teaming up with someone else is a much more achievable option.

But what happens if two ‘tenants in common’ are investing different amounts in the purchase of a property? How is this tracked – and how can both parties ensure that they are treated fairly when the time comes to sell the house?

A Property Deed of Trust is an excellent way of measuring each person’s investment in a house. Keep reading for a clear overview of this subject. 

What is a Property Deed of Trust?

A Property Deed of Trust outlines how a property is divided between its owners. In the majority of instances, ‘tenants in common’ will get a Deed of Trust because they own varying amounts of the property. For example, if two people have bought a house together, but one person contributed significantly more to the deposit, then a Deed of Trust may be necessary.

On the document, you will find information about exactly how much of the house is owned by each person and what happens if the property is sold or if one of the owners wants to be bought out further down the line. This form is legally binding and will be signed by all parties to confirm that they are happy with the terms.

A Deed of Trust can be modified further down the line, if the agreement between the joint owners changes. For example, if one person pays for renovations, this can be added to the document, and the house shares can be adjusted accordingly. Likewise, if one party is contributing more to ongoing repayments than the other, then this can be reflected in the document, too.

Keep in mind that a Deed of Trust is not the same thing as a mortgage. You will almost always need to get a mortgage first because you’ll have to confirm that you are able to buy the property in the first place before a Deed of Trust can then be created.

Why do people get a Property Deed of Trust?

Sometimes, the finances surrounding a property transaction can be complicated – especially if multiple people are involved with varying equity levels. Keeping a clear, legal record of who owns what (as well as what happens in different circumstances) ensures that everyone is treated fairly. Everything is kept legally ‘above-board’.

For example, if you choose to sell your tenanted property, the document can clarify who gets what. 

In many cases, a Deed of Trust is also useful when a parent is financially helping their child to buy a house. Still, that property is being purchased by someone else. This legal document can protect the parent’s contribution without being named on the title deeds and reassure them that their child is entering a fair deal.

Should I get a Property Deed of Trust?

A Property Deed of Trust can provide you with enormous protection. Even if your current relationship with the person you are moving in with is positive, circumstances can always cause things to deteriorate. Furthermore, even if you stay lifelong friends and never come to a disagreement, it provides clarity to have it legally stated how much each person owns.

Even if you contribute less to the property than your co-owner and, therefore, own less of it, it is still in your best interest to get a Property Deed of Trust. You may negotiate a deal with your co-owner rather than level things out – for example, contributing more towards mortgage repayments. Likewise, if you ever move someone else in the future (for example, a partner who lives with you), the Deed of Trust document will be invaluable.

If your parents have supported you financially towards purchasing your house, you should certainly get a Deed of Trust. 

It is important that you get a qualified conveyancer to support you with the Deed of Trust. This will help to guarantee that the document is legally binding and holds up in court. It also protects everyone involved in the property transaction’s investment.

How to apply for a Property Deed of Trust

A conveyancer can help you get a Deed of Trust. You will almost certainly pay for a conveyancer when buying a property anyway, so you should speak to them about getting this arranged. 

You and your co-owner may share the same conveyancer during the purchase, to reduce costs and simplify things. Alternatively, you may bring in a second conveyancer to support each party surrounding the Deed of Trust.

You must wait until you have a mortgage offer before creating the Deed of Trust.

Does a Property Deed of Trust cost anything?

You will need to bring in a conveyancer to create a Deed of Trust, and paying for their expertise will cost you money. Most conveyancers will include this as part of their overall service charge during the transaction process. Some conveyancers may list it as a separate cost.

In most cases, engaging a solicitor can range from a few hundred to several hundred pounds, depending on the complexity of the situation and the services required. You should speak directly to a conveyancer in your area if you want a specific price quotation.

Do I need a witness for a Property Deed of Trust?

Yes, a witness should be present for the signing of a Property Deed of Trust. Ideally, each person involved will have their own witness, who can then sign their name to confirm that they were present for the signing of the document. 

What are the advantages of having a Property Deed of Trust?

There are several advantages to having a Property Deed of Trust. Firstly, the document provides clarity for all parties involved, and helps to avoid disputes about who owns what, how much equity they are entitled to, and so on. 

For example, if a third party moves in (e.g. a romantic partner of one of the owners) and starts contributing to the mortgage payments, then this can create a complicated situation legally and financially. Having everything written down in black and white is extremely useful.

Another advantage of a Deed of Trust is that it is completely confidential. All parties involved can maintain their privacy. 

With the right legal guidance, there can be tax advantages to a Deed of Trust. In many cases, transferring property through trusts (as opposed to wills) can alleviate the concerns surrounding paying inheritance tax.

There are other, smaller advantages to having a Deed of Trust, too. For example, the document can be used as proof of property ownership if you ever need to prove (e.g. in court) who the legal owners are. 

For more information about the pros and cons of getting a Deed of Trust, you should speak directly to a conveyancer.

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