When two or more people are buying a property together, a declaration of trust may be required to clarify who the rightful owners are and what interest in the property they each hold. This is because, under English law, there is sometimes a distinction between the legal and beneficial owners of land or property. This article explains how to register a declaration of trust at the Land Registry.
What is a declaration of trust?
A declaration of trust is a legal document drawn up between two or more parties to record the true ownership of a property, in a situation where the parties cannot be registered on the title deeds (or where the beneficial ownership differs from the legal owners – perhaps in terms of percentage ownership). The property is then held on trust by the registered owner/s, on behalf of the beneficiaries.
Ownership of a property is recorded in the property’s title deeds, which are held at the Land Registry. However a declaration of trust can overrule the title deeds to identify the true beneficiaries of the property.
When might a declaration of trust be needed?
A declaration of trust is particularly useful when the owners have an unequal interest in the property. For example:
Why does a declaration of trust need to be registered?
Copies of the title deeds of all UK properties are held on public record at the Land Registry so they can be searched for by future prospective purchasers. Any prospective purchaser has a right to know who they are buying the property from. Since the declaration of trust will overrule the title deeds in this regard, it too needs to be available on public record.
Generally a declaration of trust will be created at the point of completion when purchasing a property. This is to safeguard each beneficiary, to ensure they are able to claim their right to the property, as soon as the purchase has been made. However, this is not compulsory, and a declaration of trust can be drawn up at any time. If, for example, the situation changes and someone else moves in and starts to contribute to paying the mortgage, it may be agreed that they can become a beneficiary of the property at a later date.
How to register a declaration of trust
Provided that the land is already registered, you then register a declaration of trust at the Land Registry by entering what is known as a Form A restriction.
The Form A restriction (which is a standard form of wording) is required where (i) two or more individuals are registered as joint owners of the property and hold the property as tenants in common, or (ii) a sole proprietor is, or becomes, the trustee of the land. A quirk of English property law is that where there is only one single registered owner of the property (the trustee), additional trustees must be appointed before sale proceeds can be received by the trustee – in other words, this needs to happen before the property/land can be sold.
Generally, it must be the trustees – the registered owners of the property – who register the declaration of trust as a Form A restriction, since their consent is required to make the deed valid. However, in certain circumstances, the beneficiaries may apply for a Form A restriction, such as in the example above where one trustee cannot sell the property. The Land Registry automatically enters a Form A restriction whenever there are two or more parties registered as owners of the property as tenants in common (rather than joint tenants).
In some circumstances where the declaration of trust has put limitations on the power of the trustees, i.e. a more bespoke declaration of trust has been entered into, they will also need to apply for a Form B restriction to be entered at Land Registry. This form will need to be submitted alongside the Form A restriction.
Help registering your declaration of trust
If you require legal assistance to register your declaration of trust at Land Registry, the Legal Stop offer fixed fee legal services. One of our experienced UK qualified solicitors can draft your declaration of trust for you, to ensure all parties are satisfied with their individual interests before it is registered. Find out more about our pay as you go, fixed fee document drafting service here.
The contents of this article do not constitute legal advice and are provided for general information purposes only.
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