It is common for someone who wishes to protect their interest in a property to be registered as a co-owner under either a joint tenancy or a tenancy in common. Sometimes, however, you may wish to protect your interest in a property without being named on the title deed. This could occur, for example, if you contributed towards the purchase price of a house but cannot or do not want to be officially registered as a co-owner. An example might be where a parent wishes to lend a child funds for the acquisition of a home, but not have a share in the ownership of it.
It is worth mentioning that in normal circumstances anyone owning a share in a property which is not their primary residence will be liable to Capital Gains Tax on their share of any profit made if the property is sold.
If you choose not to be formally registered as a co-owner, then the property or a part of that property is said to be ‘held on trust’ for you. If you intend to acquire an interest in property via this method, it is highly advisable to seek advice and have a formal declaration of trust drawn up which makes clear the ownership arrangements. This document will require the legal owner to state that while they are the legal owner of the property, they are holding it on trust for you, and it will also show the agreed extent of your beneficial ownership. For example, your interest in the property could be a share equal to that of the other owner or a share that equates to the value of your financial contribution. No matter how it is held, your interest in the property can be passed to your beneficiaries as an asset of your estate on death. A declaration of trust is the most prudent way to protect your interest in the property, as without one the existence and exact nature of your interest can be very difficult to prove.
The parties to a declaration of trust may wish it to include specific conditions stating their individual or joint agreements or responsibilities in relation to the property, such as what action is to be taken should one party wish to move out or sell the property. Contractual agreements of this nature are usually included in the declaration for ease of reference and to ensure the agreement fully covers all aspects of the co-ownership arrangements. For additional protection, the existence of the declaration of trust can also be recorded on the title documents and registered at the Land Registry.
We can advise you on the exact provisions to be included in a declaration of trust depending on your individual circumstances.