In an article last year we addressed one of the most common questions raised by people facing a relationship breakdown – Do I have any rights to my partner’s house?
We expand on this topic in this article. How do you protect your position if you intend to pay more towards a property on an ongoing basis (perhaps because you have a greater income than the other party) and wish to ensure that this extra contribution is reflected in your share? We explain exactly how this can be achieved by way of a “floating” Declaration of Trust.
Let’s start with the basics:
There are different ways in which a person can own or have an interest in property which are set out in the table below.
A “floating” Declaration of Trust in practical terms works like this:
There are two key things to note where parties choose to enter into a “floating” Declaration of Trust:
- the formula is used as and when the position ‘crystalises’ and it becomes necessary to calculate a party’s share in a property.
- the process does rely on the parties/owners maintaining good and accurate financial records.
Declaration of Trust – a bespoke agreement
While your conveyancing solicitor should explain the difference between the different types of beneficial ownership, the way in which a property is owned will depend on the instructions that they receive i.e. it’s down to you!
It may be that in your circumstances it is appropriate and fair to keep things very straightforward and to simply specify and record your fixed unequal shares in the relevant document (Form TR1).
Otherwise, you and your partner, or whoever you are buying the property with, have options.
A Declaration of Trust can be a ‘standalone’ document. As well as recording your agreement regarding beneficial ownership it can also deal with other issues such as:
- how the property will be valued;
- what happens if you do not agree; and
- the option for one owner to purchase the share of the other and any related conditions.
If you are purchasing a property with your partner and you intend to cohabit you should consider entering into a Cohabitation Agreement, which can go further than a Declaration of Trust (including provisions connected, for example, to other assets, like joint bank accounts).
Declaration of Trust – fixed shares
Provisions for unequal but fixed interests do not necessarily need to be expressed by way of a percentage. A common method is also:
Owner 1 will receive [£FIXED SUM]
Owner 2 will receive [£FIXED SUM]
with the balance to be shared equally.
This is fine, if you are content to receive a fixed amount as opposed to a percentage of the property.
This is the nebulous question central to contested proceedings. The answer is equally nebulous – it depends! It depends on:
- your financial circumstances;
- your partner’s financial circumstances;
- your respective intentions; and
- whether or not you have, or plan to have children.
Buying a property is likely to be one of the most important financial investments in your life. If you are to own property with a friend, family member, or partner you should have open and wide-ranging conversations about how you intend to own the property and why. Either way these are vital conversations to have. You must talk about money. While this may be a difficult for many reasons, it is likely to be made easier if you know what your options are.
Take ownership of the situation and your position (and not just the property!) – steer the boat.
If you are buying a property with a partner, family member or friend consider:
- Who is paying what towards the purchase price?
- Will the mortgage be in joint names?
- How will it be funded?
- Do you intend to carry out improvement or renovation works on the property?
- Is there a difference between your respective incomes or financial circumstances?
- Taking into account all your circumstances what do you think it is fair for you each to pay towards the mortgage and other expenditure?
- Do you wish to protect the fixed sum or amount that you have invested in the property, or do you wish to ensure that this is reflected by way of a percentage (i.e. you take specified share of the benefit or loss subject to the value of the property)?
For an initial FREE consultation on any aspect of family law, call Manders Law on 01245 895 105 or email us here.
Note: this blog is intended to give an overview (rather than comprehensive guidance and advice) on your legal or financial position and is provided for information only. It is not an endorsement of any product or service provider.