November 6

What is a Floating Deed of Trust (with shares)?

Family Law, Property Conveyancing

A floating deed of trust, (also referred to as a Deed of Trust), is a legally-binding document that records the financial arrangements between joint owners of a property, and/or anyone else who a financial interest in the property.  The idea is that, when the property is eventually sold, or if one party wants to buy the other out, it will be clear as to what each party’s interest is worth.

What is the purpose of a Declaration of Trust?

The purpose of a Declaration of Trust is to remove any uncertainty as to what will happen to each person’s money and to avoid disagreements around it in the future. 

floating deed of trust when jointly buying a property
Declaration of Trust With Floating Shares

Who can benefit from a Floating deed of trust?

A Declaration of Trust is commonly used by:-

  • non-married co-habiting individuals (particularly where one of the individuals contributes a greater amount towards the purchase of the property and/or the mortgage repayments etc);
  • individuals purchasing investment property together;.
  • individuals where a family member is providing financial help towards the purchase, so that the loan, e.g. from parents, is ring-fenced and is returned when the property is sold.

What is the difference between a simple Declaration of Trust and a
Declaration of Trust with floating shares?

A simple Declaration of Trust sets out the contributions made by each party towards the purchase and specifies the percentage of beneficial ownership that each respective party will hold.

Upon sale of the property, the contributions will be returned to the contributing party and the remaining proceeds of sale split according to that percentage.

However, over the course of ownership of property individual circumstances can change.  Perhaps to start with one person was the higher earner and therefore contributing considerably more towards the mortgage repayments, but over time the second owner’s earnings increase to bring them in line with each other.  A Declaration of Trust with floating shares provides flexibility and takes changes in circumstances into account.

Case Study

We recently acted for a non-married couple who were purchasing their first property together.  Our client injected a significant deposit towards the purchase price from the proceeds of sale of another property, whilst his partner had no money to offer upfront.  However, though at the time she was studying to become a physiotherapist with zero income, her earning potential in a few years’ time was significant and both parties wanted that to be recognised, as her contributions towards the mortgage and associated bills would increase over the years.

Within the Declaration of Trust with Floating Shares document we drafted, we were also able to make reference to any improvements that may take place at the property, as well the costs associated with purchasing the property in the first place (e.g. stamp duty, solicitors costs etc).

The Declaration of Trust with Floating Shares provided a formula for calculating their respective beneficial interests in the property from time to time.

Do I need a solicitor to draw up a floating deed of trust?

A solicitor can help advise you on whether a floating deed of trust with shares is the right arrangement for you. You can also find plenty of impartial advice online e.g.

How can we help?

Sanders Witherspoon LLP are a team of Billericay solicitors and we have have lawyers with the expertise to advise you based on your circumstances – whether that be a straight forward Declaration of Trust or one with Floating Shares.  Call us today on 01277 284532 and we will be pleased to help.

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