Ron Thomas in our Trusts & Estates team details 5 key reasons it’s so important to create a Declaration of Trust!
They prevent disputes over future sales of land
We undertake a lot of work in the preparation of a declaration of trust for our clients purchasing land and property as joint owners who are often making different levels of contributions to the purchase price. They are a vital document for buyers to have as they are intended to (and do) prevent disputes at the time of a later sale of land. Such a deed must reflect what the buyer’s intentions were at the time of the purchase. To fall into dispute of such matters is time consuming, unpleasant and very expensive.
These documents are often prepared to assist and support our property department to ensure that the buyers have a clear understanding of the extent of their respective interests in the property. Often one buyer will be paying a far higher contribution than another. All buyers want their interests to be universally understood and clearly set out by a written agreement.
They are vital if tenants in common have an unequal stake in a property
Where there is a tenancy in common these deeds are vital where there are unequal stakes in a property. Without such a deed the assumption is that the property is held in equal shares. These deeds have the objective of removing uncertainty and to provide a reliable benchmark for the owners to know with as much certainty as possible, what is to happen if one or the other owners later wants to buy out another with an interest in the land or if the property is sold following relationship breakdown, when feelings can often be running high.
They can include a huge range of details
The benefit of these deeds is that so much can be included. For example, who pays the most? Who deals with the mortgage? Who pays the outgoings? Has a third party contributed? Was the third party’s contribution gifted or not and to whom? Does a third party need to be included? What if one party is paying for extensive property improvements as well as a deposit? Is one party paying a significant, regular and larger contribution to the mortgage payments across its term? Do unmarried buyers want their expressed intentions to be carried forward and to apply if they later marry and are unfortunate enough to Divorce and if so, are they aware that matrimonial law differs greatly to the law of property.
They can prevent long and complicated challenges by other parties
These documents can be challenged, so it is important that buyers are made aware of this and that they can take the opportunity to seek separate legal advice. It is after all often the case that one or more of the parties are conceding a large interest in land to others. Nobody wants to see a long, laborious and unwieldy declaration of trust, but it is important to try and capture in the narrative to these documents the main planks of the agreement and importantly, the reasons for them. The facts need to be accurate, lest one party claims later that the deed misleads or is simply incorrect.
This can give rise to unwanted, expensive litigation that can lead to a deed being set aside or upheld with only money damages being paid to a party who still then, can often remain disgruntled.
They work!
A recent case of Savage v Savage (2024) ECWA CIV 49) has again demonstrated that there is little to nothing in the way of limitation over what can be considered by judges in the face of Court applications to determine interests in land and property in the absence of a clearly defined deed of trust. Such applications can allow anybody with an interest in land or property to make an application to a Court for an order for a declaration of their interest.
Sometimes such applications are made in the face of what is thought to be a clearly defined declaration, so our work is intended to avoid this occurring in the way that we prepare the deed. Minority beneficiaries are not disadvantaged in how the Courts interpret matters. Judicial discretion is wide. Those holding the majority beneficial interest are not at all privileged. A properly drawn deed of trust will significantly, avoid disputes completely or serve to limit the area of a dispute in the future.
So, in summary…
(1) We are clear and concise in our drafting of a Declaration of Trust and are sure to have invited either or both parties to take their own independent legal advice if they wish to do so. This is important where the instructions have been received by co buyers and 3rd party contributors via our own related departments.
(2) We ensure that the named parties give their own individual written approval before being asked to sign.
(3) We advise that the deed is there to support them, but that there is no guarantee of a deed being upheld if later challenged.
(4) We take into consideration that a deed can be disadvantageous to a party and that there is often a close relationship behind the instructions. As such there is often a presumed level of trust and confidence given by one party to another.
(5) We ensure that one party’s instructions are not loaded in their favour and inadvertently reflected in the deed.
(6) A good trust deed is one drafted by our experienced Solicitors in our Trusts and Estates department, versed in the requirements of a deed and the law that underpins these documents and are expressed clearly in a way that the parties can freely understand, anticipating the vagaries of the established law as well if these documents are later brought before the Courts.
So what next?
To learn more about our Trusts & Estates services, simply click here. Alternatively, fill out the form below to ask us a question!
Disclaimer
The contents of this blog or any other published by Talbots Law cannot be considered as legal advice. You should take no action without prior consultation with a qualified solicitor or legal professional.