If you are buying a property on joint ownership, you might want to learn in detail about Deeds of trust and how they work. This information can help you make a legal and financially sound decision.  

I am here to tell you what is a trustee’s deed, how it functions, and what benefits can you avail from it. 

Let’s begin.

What is the Deed of Trust?

A deed of trust also known as the ‘Declaration of Trust’ is a legal document that secures all the financial positioning between two parties while making a land deal, usually, the parties involved are referred to as the trustee and beneficiaries of the estate. 

The deed trust is drawn up while the realty is being bought, it serves a purpose of making the buyer’s financial and legal stance clear on the property. It also plays an important role when selling off the property.  

How Does it Work?

The deed of trust can be drawn in 2 circumstances: 

  1. If you are buying a property jointly with someone or 
  2. If you are financing the property through a 3rd party. 

The document provides the legal structure ownership, mortgage repayments and the responsibilities of the ones involved. 

The deed of trust will always include a trustee, which will work for the interests of the beneficiaries when the time arises the trustee has to hand over the property to the beneficiary. 

What Does the Declaration of Trust Include?

The declaration is flexible in its format, it can include different things which might be addressed by the owners, however, the usual main points that are included in the deed are as followed: 

  1. The name of those involved, trustee, trustor, beneficiaries, and at times the advisors
  2. The land registry 
  3. The deposit, loan amount, and its purchase price
  4. Mortgage payments and their lifespan 
  5. Share of equity in the property.
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Difference Between a Mortgage and a Deed of Trust

The Mortgage and a trust declaration has many things in common. However, there are some basic differences in each of them:

MortgageDeed of Trust
Has 2 parties involved: The lender and the borrower Has 3 parties involved: Trustee, lender, and borrower 
The owner of the property is the borrower. The legal title of the property is in the name of a trustee until the loan has been cleared
It has a judicial foreclosure Non-judicial foreclosure is applicable 

When to Get a Deed of Trust?

It is better to draw up a deed of trust when you are purchasing a jointly owned property or financing it through someone else, I advise you that you should make it as soon as possible. 

A bit of sound legal advice might be needed for comprehensively protecting your interest, so It would be better to get an advisor. 

Buying Property with Someone’s Help

If you are financing a property through a loan or with someone’s aid, the deed is drawn up to secure the interests of the lender. You will have to nominate a trustee. (For instance, anyone from your family members, or friends, who you will be the guarantee for your loan.) 

In case you (trustor) are unable to pay back the loan or are defaulted, the financial obligation will fall upon the trustee. The trustee will be held accountable for the mortgage repayments due to the trust deed

When the mortgage has been paid off, the deed in the trust is dissolved and the ownership title is handed over to the actual buyer of the property.

Buying Property as Joint Owners

The contract of trust works as a legal rule and outliner between the joint tenants who have bought property together.

If the co-owners are unable to decide or don’t want to name one of them as the legal owner of the estate (on whom’s name the land registry will be registered), they select a ‘trustee’. 

The trustee has to work for the interest of the trustors (the joint-possessors) in a transparent manner. 

When the property is sold off, this contract works as a crucial document between co-owners of the realty.  

Things to Consider Before Using Declaration of Trust

It can be a very good way to protect your interests in the property but you need to keep in mind some things before signing up the trustee deed. 

If you are drawing this contract because of 3rd person financing, make sure that you have a steady income and will be able to pay the mortgage payments timely. 

When in co-ownership, make sure the trustee has no personal interests or hidden agenda. They are transparent in dealing with the benefit of both owners

FAQs

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Is there an alternative to using a declaration of trust?

Tenants in common is an alternative method that can be used instead of the declaration of trust, the simple difference between these two contracts is that tenants in common do not form up any trust or trustee, however, the ownership status remains the same.

Check more about it by clicking here.

Is it a good idea to use the declaration of trust?

If you are a lender, it might be an amazing idea to draw up a deed of trust, however, it is not preferred by the borrowers because of the heavy risk it imposes on the trustee. In my personal experience, finding a trustee is quite difficult as well nowadays.

How to remove a deed of trust in the UK?

One of the best ways to remove deeds of trust UK is to pay back the mortgage and receive the letter of reconveyance. This will surely remove the binding contract.

If you are the co-owner of the land, settling things between the one and the other owners like arranging out alternatives such as tenants in common might remove the deed of trust.

Can I make my own declaration of trust?

The document is drawn at a cheap price in the UK. You can check it out here.

Nonetheless, to make your own document, you will have to state the information which is included in the declaration of trust. This includes the purchase price of the estate, the trustee’s name, and all other relevant information that I have mentioned above.

Who keeps the original declaration of trust?

The original deed is kept by the lender. It is due to the fact that the deed is drawn up to safeguard the interest in the property of the lender, so the original document is kept by the lending party.

In joint ownership, the trustee may hold the one and only original document for the declaration, once the realty terms have been settled, it might be passed on.

Final Thoughts

This document is a good source to safeguard your share in the estate, but it should be drawn up with complete knowledge of all the technical details. 

I hope I was able to answer all the queries you had regarding the deed of trust. You can use this information to fully understand and draw off the contract for yourself. Feel free to reach out if you need more help!

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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