Declaration of Trust Advice

What a Declaration of Trust Does

A declaration of trust, sometimes called a deed of trust, is a written document in which the legal owner or owners of a property state who holds the beneficial interest in it and in what shares. The register at HM Land Registry records who owns the legal estate; it does not record the beneficial interests behind it. The declaration is the document that does.

On a divorce the family court has power to order one spouse to transfer property to the other, whatever the title says. For an unmarried couple there is no equivalent power: what each of you takes from the home when you separate is decided by property and trust law, and the first question a court asks is whether there is an express declaration of the shares. If there is one, it normally settles the matter. If there is not, the court has to work out what you both intended from contributions and conduct, which is the territory of a property dispute between unmarried partners. Where there are children, the court has a separate power under Schedule 1 to the Children Act 1989 to order a parent to settle or transfer property for a child's benefit, which our page on Schedule 1 provision for a child covers.

A declaration is most useful where the money going in is unequal: one partner pays the whole deposit, one earns more and pays more of the mortgage, or a parent gifts or lends part of the price. It matters just as much where the home is in one name and the other partner is contributing, because without something in writing that partner may own nothing.

What the Law Requires of the Deed

Section 53(1)(b) of the Law of Property Act 1925 provides that a declaration of trust respecting any land must be manifested and proved by some writing signed by some person who is able to declare such trust. A conversation or an unwritten understanding between you does not meet that test. Section 53(2) preserves resulting, implied and constructive trusts, which is why a court can still find a share without a document, but only after a contested and uncertain exercise.

A declaration is usually made as a deed. Under section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 an instrument is a deed only if it makes clear on its face that it is intended to be one and is signed in the presence of a witness who attests the signature, then delivered.

The Court of Appeal in Pankhania v Chandegra confirmed that an express declaration of trust is regarded as conclusive unless varied by subsequent agreement or affected by proprietary estoppel, and that in the absence of fraud, mistake or undue influence the parties cannot go behind it. Where the conveyance comprehensively declares the beneficial interests, there is no room for a resulting or constructive trust argument unless the document is set aside or rectified.

By contrast, where a home is bought in joint names with no express declaration, the Supreme Court in Jones v Kernott held that the starting point is that equity follows the law and the couple are joint tenants in equity as well as at law. That presumption can be displaced by showing a different common intention, deduced from conduct. That is the argument a declaration is designed to make unnecessary.

Joint Tenants, Tenants in Common and the Register

When two people buy, panel 10 of the transfer form TR1 asks how they will hold the property: as joint tenants, as tenants in common in equal shares, or on some other trust with the details added. HM Land Registry guidance says the panel should be completed where there is more than one transferee and that the transferees must then sign the form. Form JO is a voluntary alternative for declaring the trust at the time of purchase, signed by each joint owner.

GOV.UK explains that joint tenants have equal rights to the whole property, the property goes automatically to the other owner on death and it cannot be passed on by will. Tenants in common can own different shares, a share does not go automatically to the other owner on death and it can be left by will. Most declarations of trust for unmarried couples therefore go with a tenancy in common, and the deed sets out the shares.

Unless HM Land Registry is told that the owners hold as beneficial joint tenants, it must enter a restriction in Form A against the title under section 44 of the Land Registration Act 2002. The restriction does not record your shares. Its purpose is to make sure the beneficial interests are overreached when the property is sold, so a buyer is not dealing with a sole owner as if there were no trust.

Where the property is in one name only and the deed gives the other partner a share, that partner can apply for a Form A restriction to flag the trust, because an interest under a trust of land cannot be protected by a notice. A tenancy in common should be paired with a will, which our will writing service prepares separately.

What the Deed Should Cover

A well drafted declaration deals with:

• the shares, either as fixed percentages or as a formula that returns each deposit first and divides the balance
• how the mortgage is split, and whether paying more than your share of the instalments changes your beneficial share or counts as an occupation cost
• money from parents or others, and whether it is a gift to one of you, a gift to both or a loan to be repaid on sale
• improvements and major works, and whether they are reflected in the shares
• what happens if you separate: who may stay, how a sale is triggered, how one of you can buy the other out and how the property is valued
• the order of payments on sale: mortgage, costs of sale, deposits returned, then the balance in the agreed shares
• a review clause for events such as a child, a remortgage or a substantial gift

The problems we see most often are declarations signed without either partner understanding what a tenancy in common means, deeds that contradict the transfer panel, gifts from parents that later turn out to have been loans, and shares that were right at purchase but never updated when one partner cleared the mortgage or paid for an extension.

A later change to the shares is a disposition of an equitable interest, which under section 53(1)(c) of the 1925 Act must itself be in writing and signed by the person giving up the interest. Where there is a mortgage, the mortgage conditions decide whether the lender must be told or must consent before a share is given to someone who is not a borrower, so we check them first.

How the Process Works

1. We take instructions on what each of you is paying in, who will pay the mortgage and what you both intend should happen on sale or separation.
2. We explain joint tenancy and tenancy in common and the effect of each on death, so the choice is made knowingly.
3. We draft the declaration, including any gift or loan from a parent and the mechanics for a buy-out or sale, so that each of you can take advice on it before signing.
4. Where a purchase is in progress we liaise with your conveyancer so that the transfer panel or form JO matches the deed.
5. You each sign the deed in front of a witness and it is dated and delivered. Keep the signed original safe, because HM Land Registry does not hold it for you.
6. Where the property is already registered, we deal with any Form A restriction and, if needed, the change from joint tenants to tenants in common.

When Legal Advice Is Especially Important

Advice matters most where:

• one partner is contributing far more than the other and the property is going into joint names
• the home is in one partner's name and the other is about to pay towards the mortgage or works
• a parent is providing part of the price and has not said whether it is a gift or a loan
• you already own together and cannot find, or never completed, a declaration
• you are separating and one of you wants to rely on, or challenge, a declaration signed years ago

A declaration can be challenged only on narrow grounds, so independent advice for each partner before signing protects both of you. If a dispute has already started, the route is a TOLATA claim under section 14 of the Trusts of Land and Appointment of Trustees Act 1996, where the court may declare the nature or extent of each person's interest. If you feel unsafe or controlled at home, or you are being pressed to sign, the police can be reached on 999 in an emergency and the National Domestic Abuse Helpline on 0808 2000 247.

How RakLAW Solicitors Can Help

We draft and review declarations of trust from our office at 42 Shad Thames in Southwark, a short walk from Tower Bridge. RakLAW Solicitors was founded by solicitor Rakesh Prajapati.

A declaration usually sits alongside a cohabitation agreement, which covers the wider arrangements while you live together, and both belong to our unmarried couples and cohabitation work. Couples about to marry may want a prenuptial agreement instead, and if you have already separated see separation for unmarried couples.

RakLAW does not offer legal aid and is privately funded. Our charges are on the family law fees page and the first 15 minute consultation is free. Call 0203 345 2000 or book an appointment.