How, then, to protect each person’s share in the property? It’s a difficult problem.
When a property is purchased or transferred into more than one name the joint owners hold the property as Trustees. In the traditional model they would hold it on trust for themselves in equal shares but this is not always the case.
If this is not the case it is important to have an agreement in a Declaration of Trust setting out the respective shares which will avoid the problems of a resulting trust or a constructive trust in the event of one party wanting to sell his/her share or on separation or death. Disputes over shares in a property in those circumstances can be costly, time-consuming and draining which can be avoided if a properly thought through Declaration of Trust is entered into by the parties when the property is acquired.
Different financial contributions by the parties have to be agreed either as a percentage of the value of the property or as a return of the amount paid and the remainder to be divided, after repayment of any mortgage, in proportions agreed by the parties.
If these terms are not agreed at the outset disputes can easily arise in the event of one party wanting to sell his/her share or on separation or death. A Declaration of Trust can also agree the framework and procedure for one party to buy out another’s share in these circumstances which provides clarity and certainty at a difficult time. If this is not in place the result is often anxiety and tension and possible court proceedings if agreement cannot be reached.
A property purchase is normally a person’s biggest investment. The cost of a Declaration of Trust when a property is purchased in joint names where contributions are not equal is a relatively small price to provide clarity and certainty and avoid costly disputes over each party’s share.
For further information contact Catherine Fromant, solicitor at Coole Bevis on 01273 322817 or by email firstname.lastname@example.org or call 01273 722532 or email email@example.com to set up a consultation.