When you’re buying a property with someone else you get to deal with a lot of legal documents, one of which is the Deed of Trust. This legal document explains the ownership proportions of your home.
In this blog, we’ll explain what a Deed of Trust is, how it works, its use and how to get one. Let’s take a look!
What is a Deed of Trust?
A Deed of Trust is a legal document that outlines the rules for a property held by one person or group (trustees) for the benefit of another person or group (beneficiaries).
This deed is common when multiple parties are involved in property ownership. To simplify, when you’re buying a property with someone, you can choose to become ‘joint tenants’ or ‘tenants in common’. Both have a different meaning:
- Owning the property equally is referred to as joint tenants. If one dies, the property automatically passes to the other.
- Tenants in common on the other hand, can own different shares. They can also leave their share to someone else in their will.
A Deed of Trust is often used by ‘tenants in common’ who have contributed different amounts toward the purchase price of a property.
Why would you need one?
A common reason for people to have Deed of Trust is to protect financial contributions. It safeguards the money each person has invested in the property, including:
- How much each person, and any third parties, contributed towards the deposit.
- Documenting unequal mortgage repayment responsibilities.
- Outlining how renovation costs affect ownership shares.
- Agreeing on contributions towards ongoing property costs like household bills.
A Deed of Trust specifies what percentage of the property each person owns. And what happens if the property is sold or if one owner wants to buy out the other.
For example, if you contribute more to the deposit than your partner, a Deed of Trust ensures you get your fair share back if the property is sold. It also ensures that:
- contributions from third parties are protected, such as parents who may have contributed to a deposit;
- the terms agreed for when the property is sold are met.
How to get a Deed of Trust
As a legal document, you need a conveyancing solicitor to draft a deed of trust for you. This will ensure that it outlines everything correctly so that it’s legally binding.
The cost of this legal document will depend on the complexity of the deed and your solicitor’s fees.
Why understanding how it works matters
A Deed of Trust ensures that all parties’ interests are protected and that the property is managed according to the ‘trustees’ intentions. Misunderstanding or misusing these documents can lead to legal complications and potential financial loss.
Remember, if you’re ever unsure about any legal documents involved in your property transactions, it’s always wise to consult with a legal professional.
Last Updated: June 21st, 2024
