Achieving home ownership is a significant milestone in anybody’s life. After the stressful period of property searching and saving, it can be easy to become sidetracked from the legalities that don’t seem like they’ll matter until years down the line. It’s important at this point, especially for those purchasing property with another person, to recognise that while unequal contributions to a house and its deposit may not seem like an issue now, it could be down the line.
To address unequal contributions to a property and secure each individual’s right to their own funds, a Declaration of Trust is an essential document to put in place. In this guide, we explore the legal structure of this document and breaking down why it’s important for first-time buyers to put one in place.
What is a Declaration of Trust?
A Declaration of Trust is a legally binding document that records all financial arrangements between everyone who has a portion of money in the home. It’s curated by co-owners of a property and legally speaking, it outlines three important parts of the home owning process:
- It records exactly how much money has been contributed by each person
- It states how money will be split amongst contributors when the property is sold
- It lays out agreed terms for what will take place if one person wants to sell the property later down the line
Without this document, the law will assume that the cohabitants plan to split everything equally between them, regardless of whether contributions in the beginning differed in amount.
Legal vs beneficial ownership
To properly understand a Declaration of Trust you must be able to distinguish between what it means to have legal ownership as opposed to beneficial ownership.
If you have legal ownership of your property, your name will be registered on the title deeds at the Land Registry. You are responsible for decisions made regarding the property (such as selling or remortgaging) and you’re jointly liable for the mortgage.
If you have beneficial ownership, that means you are entitled to the money that comes from the property when it is sold.
Why is a Declaration of Trust important for first-time buyers?
A Declaration of Trust is very important for first-time buyers. It is put in place to prevent disputes further down the line by providing a clear, agreed-upon explanation of the ownership structure.
Unequal contributions
For first-time buyers, there is often an assumption that if they split up or choose not to live together anymore, they will get back the same amount of money that they put into buying a property. This isn’t the case. Without a Declaration of Trust in place, all funds will be split in half, regardless of who paid what.
And it isn’t just about the deposit. If one partner agrees to pay 70% of the monthly mortgage payment due to higher earnings, a Declaration of Trust can reflect this. This is important for protecting the payments of the higher earner.
Protecting family gifts
In 2025, £11bn in financial support was given to first-time buyers by families. If a relationship or cohabitation situation breaks down years later, the gifts received by families become joint equity. This lets ex-partners walk away with half of the gifted money that a parent intended to benefit their own child.
The deed quickens this process by having a pre-negotiated insurance policy. It has the answers to difficult questions regarding selling and valuing so that when it comes to discussion, disagreements about the property are kept to an absolute minimum.
What can a Declaration of Trust include?
A Declaration of Trust should essentially include the answers to key questions asked when the property owners decide they won’t be living together anymore.
How will upfront costs be divided?
This is the most common feature of the deed. If one partner paid 60% and the other paid 40%, the document will act as evidence of this and ensure that each partner gets their specified amount.
It also accounts for Stamp Duty Land Tax (SDLT), conveyancing solicitor fees, and structural surveys, too.
How will ongoing costs be divided?
The document will outline which partner is responsible for mortgage payments. If a 70:30 payment ratio was initially agreed, the document proves this and makes sure that this is how the contributions are split going forward.
It can also specify how daily running costs and bills are split. On the occasion that a partner temporarily can’t pay their share, the document can clarify whether the other partner’s payments will increase during this time or whether they’re treated personally to the individual.
What happens when it comes to selling or buying out the property?
If one co-owner wants to sell the property or move out, the deed will usually state that they must first offer their share to the other co-owner. This can then allow the remaining co-owner a set period of time to arrange a buyout.
To prevent arguments over the property’s worth, a Declaration of Trust can have instructions on how to conduct a valuation.
If all else fails, the deed can dictate that the property must be put on the market. This prevents one owner from trapping the other in the joint investment.
Renovation equity
First-time buyers who purchase properties and orchestrate renovations that significantly add value are entitled to gain a percentage or the entirety of that value upon sale.
It’s important to define what counts as equity-boosting renovation and what counts as general maintenance in the deed to avoid confusion or arguments.
When should you put a Declaration of Trust in place?
The best time to set a Declaration of Trust in stone is before completion of the property purchase. This allows your solicitor to make sure it’s present in all standard property purchase paperwork, ensuring that all parties are completely aligned and agreed on financial splits before any legally binding actions take place.
Additionally, the cost-effectiveness of getting your deed drafted alongside the conveyancing process is appealing, especially to younger couples. Waiting till after you’ve moved in or years later will mean paying more to open a new legal file and review old deeds. This can be avoided by being proactive and getting your deed out of the way before moving in.
Declaration of Trust vs Joint Ownership
There are crucial legal differences between being joint tenants and tenants in common that first-time buyers, in particular, must understand when making a property purchase.
Under a joint tenancy:
- Both co-owners are treated as a single legal owner, meaning you own 100% of the property together.
- If one owner passes away, their share of the property will be automatically passed to the other owner, regardless of what might be written in their Will.
- If co-owners part ways, the law will split the total deposit paid in half, meaning a co-owner who has paid a bigger half will lose out.
Under a tenancy in common agreement:
- Tenants own individual shares of the property’s equity, meaning that shares can be split in any way the owners may choose.
- If one co-owner passes away, their share of the property passes to whoever their Will instructs it to.
- You will need to use a Declaration of Trust to officially write down and legally protect the exact conditions you have agreed on, a 50/50 split may still be enacted.
Can a Declaration of Trust be changed?
You can, and naturally will, edit your Declaration of Trust over time as life events take place. The common events that lead to document updates are:
- Marriage or Civil Partnership
- Major renovation
- Having/adopting children
- Career breaks
- Individuals paying off large chunks of the mortgage
So long as both parties consent, changes to the deed can go ahead. A Declaration of Trust is legally binding, meaning one co-owner cannot decide to just change the terms when their circumstances change. Every term must be agreed upon; the deed cannot be replaced.
This is why it is recommended to treat your Declaration of Trust like you would treat your Will. Regular review every few years or following major life changes should ensure that shared intentions are always up to date.
Common misconceptions
For first-time buyers, it’s easy to fall into believing common misconceptions about these sorts of legalities, as it is with any unfamiliar process. Here are a few of the misconceptions we hear the most:
“Only one of us needs to be a first-time buyer to qualify for Stamp Duty relief.”
To qualify for Stamp Duty relief, every single buyer named on the legal title must be a genuine first-time buyer.
A Declaration of Trust is essential to formally document this unfair upfront tax expense. It legally ensures that when the property is sold, you recoup your extra stamp duty costs first before any remaining equity is split.
“We can bypass the rules by putting the property in the first-time buyer’s name and using a trust to give the other person their share.”
Attempting to hide a non-first-time buyer’s ownership behind a sole name to avoid stamp duty is considered tax evasion by HMRC.
A legitimate Declaration of Trust allows you to purchase jointly and accept the tax bill. It then acts as your legal safeguard, clearly defining who paid the deposit and the stamp duty to protect your respective investments.
“If we lose our first-time buyer relief and have to pay standard stamp duty anyway, a Declaration of Trust is pointless.”
Some buyers assume that if they cannot get tax relief, their financial purchase defaults to a standard transaction where a Declaration of Trust is no longer useful. This is an expensive mistake to make.
Paying standard stamp duty can create an immediate, unequal financial gap between co-buyers right at the start of your property journey. A Declaration of Trust legally records who paid this tax, ensuring your individual capital is protected.
How Peter Ross can help
Despite the natural urge to dive straight into moving dates and decoration when buying your first home, you will thank yourself in the future for getting your finances and legal documents in order first.
It’s important not to think about a Declaration of Trust as the preface of a breakup. It’s there to maintain transparency between you and your cohabitant, protecting both homeowners’ money and your potential future family.
Every co-buying situation is unique, which is why general online Declaration of Trust templates don’t provide the legal protection that you need. That’s why our experienced residential property team offers complete guidance through the entire process of writing and submitting your deed. We tie this in with the rest of client’s conveyancing to make the process as easy as possible during the excitement of purchasing.
Contact our office today for more information and support with protecting your future.