Declaration Of Trust

delluver

Debt_Free_Chick wrote:

Yes - the trust deed will show how the equity is split. It's just that, a formal document which shows that, when the house is sold, who gets what.



What the trust deed doesn't do is to give your parents any security. You want to think of it like a mortgage? Well, a mortgage company would have a charge over the property and this would be registered at the Land Registry. Anyone buying the property would see that the mortgage company has a legal interest in the property. In addition, the property cannot be sold without the consent of those who have a charge.

So, for your parents to have the same rights as a mortgage company, they should also have a charge over the property. This way, they need to agree to you selling the house and that pretty much guarantees that will actually get their money back. Without the charge, you could sell the house and run off with all the equity. Your parents would be left clutching a piece of paper that proves you owe them £95k, but they would have no way of actually getting their hands on the money.

The trust deed is only an agreement as to the split of the equity but gives your parents no way of actually getting the money. The charge over the property does.

HTH

Ok so how does a declaration of trust secure my partner's and my investment in the house if it's just a piece of paper showing what you are entitled to.

Debt_Free_Chick

delluver wrote:

Ok so how does a declaration of trust secure my partner's and my investment in the house if it's just a piece of paper showing what you are entitled to.

Your names are on the deeds as joint owners. You actually own the property.

The deeds (now just an electronic record at the Land Registry) would show that you are both the owners, but that the mortgage company and your parents have a legal interest in it.

All this stuff will actually be sorted out by your solicitor when you sell. They get the deeds and contact those who have a registered charge to ask "How much are you owed?". The mortgage company and your parents show evidence of what's owed (your parents would show the deed) and when the sale goes through, your solicitor settles those debts

delluver

All this stuff will actually be sorted out by your solicitor when you sell. They get the deeds and contact those who have a registered charge to ask "How much are you owed?". The mortgage company and your parents show evidence of what's owed (your parents would show the deed) and when the sale goes through, your solicitor settles those debts



My parents are the "mortgage company". Ok so you're saying that the document would secure my parent's interest, not just ours.

Debt_Free_Chick

delluver wrote:

My parents are the "mortgage company". Ok so you're saying that the document would secure my parent's interest, not just ours.

Oh bother ... I had overlooked the fact that your parents were providing all of the mortgage - d'oh!

Yes - if your parents register a charge on the property, then you can't sell it without their consent. This protects their interests by giving them security for the loan. Without this, they just have just lent you money and it wouldn't be connected to the property.

The deeds also show that you and your partner actually own the house - that protects your interests.

The trust deed will show how all those interests are split up, in terms of the proportion of the total equity owned by each of you.

Hope this helps

delluver

Debt_Free_Chick wrote:

The trust deed will show how all those interests are split up, in terms of the proportion of the total equity owned by each of you.

Hope this helps

Yes, that's right.

http://www.questbrook.co.uk/trust.htm

According to the site I can have a declaration of trust written up to show the fixed sum my parents will get on the proceed of a sale and then balance divided in agreed percentages between us. (19% my partner, 81% me).

I can't see what's up with that.

Bossyboots

delluver wrote:

Yes, that's right.

http://www.questbrook.co.uk/trust.htm

According to the site I can have a declaration of trust written up to show the fixed sum my parents will get on the proceed of a sale and then balance divided in agreed percentages between us. (19% my partner, 81% me).

I can't see what's up with that.

DFC and I have both told you the problem. You could sell the property without paying your parents back. That arrangement might be fine for you but it is not fair to them. You would leave them having to sue on the declaration to prove their case. Not very nice for parents to have to do to their own offspring, assuming you have not decamped totally and can't be found.

delluver

Bossyboots wrote:

DFC and I have both told you the problem. You could sell the property without paying your parents back. That arrangement might be fine for you but it is not fair to them. You would leave them having to sue on the declaration to prove their case. Not very nice for parents to have to do to their own offspring, assuming you have not decamped totally and can't be found.

I can't see how we could do that if it's drawn up by a solicitor.

dottyanne

Just a quickie - when me and now hubby bought our house - i decided to have a Deed of Trust made up - I worked as a legal secretary at the time. I did this as we hadnt been together that long but couldnt get a joint mortgage at the time - only my now hubby - however i paid probably more of the deposit than he did so I wanted this to protect my investment. I still have the Trust even though we are now married - the mortgage is still in my husbands name - i wonder if we can add my name to the Land Registry or Deeds now or not until the mortgage is paid off?? any answers anyone??

delluver

dottyanne wrote:

Just a quickie - when me and now hubby bought our house - i decided to have a Deed of Trust made up - I worked as a legal secretary at the time. I did this as we hadnt been together that long but couldnt get a joint mortgage at the time - only my now hubby - however i paid probably more of the deposit than he did so I wanted this to protect my investment. I still have the Trust even though we are now married - the mortgage is still in my husbands name - i wonder if we can add my name to the Land Registry or Deeds now or not until the mortgage is paid off?? any answers anyone??

You can. I was told that they just don't like doing it too frequently, but in your case, it's just the one off.

Debt_Free_Chick

delluver wrote:

I can't see how we could do that if it's drawn up by a solicitor.

The Trust Deed is just an IOU. Effectively it says "when this house is sold, IOU (my parents), £95k".

But an IOU can be a broken promise - you can simply refuse to pay what you owe or run off with the money never to be heard of again.

The charge on the property is security - think of the difference between a secured and an unsecured loan. If you refused to honour the IOU, your parents could simply "hold you to ransom" using the charge over the property, which prevents you from selling without their consent.

Thinking of your situation, it may be simpler for your parents to simply take a charge over the property. That would deal with the amount they are owed and the security. The split between you and your partner could probably be taken care of if you were to be tenants in common (but not, I think, if you were joint tenants) - what do others think?

The security issue is one for your parents, really. It's not obligatory and they may not want to take it - but you should all be sure that you all know what you're letting yourselves in for.

Cheers