Deed of Trust

A deed of trust is a legal document that outlines the co-ownership when it is purchased jointly by two or more individuals, but not in equal shares.

It is also known as a trust deed or a declaration of trust. It is mainly used when individuals buy a property together, such as when family or friends buy a house.

How Does a Deed of Trust Work?

Ownership of Shares

The primary purpose of a deed of trust is to specify the percentage of property owned by each party involved. If one individual purchases a larger portion of the assets, their share might be greater.

Financial Contributions

The document also details and outlines each party's financial contributions to the property's purchase price, maintenance costs, or mortgage payments.

Rights and Responsibilities

The deed of trust also clarifies each co-owner's responsibilities. It can also cover decisions regarding selling the property, what happens if one party opts to sell its share, and how to handle disputes.

Protecting Investments

The deed also protects the interests of the parties involved in the purchase. In case of a sale, the proceeds should be divided according to the outline of the deed and reflect each person's investment in the property.

A deed of trust and a mortgage deed are different documents. The mortgage deed is a legal document to secure a loan against a property. It outlines the terms and conditions of the arrangement in which the mortgage serves as security for the loan.

When Should You Consider Having a Deed of Trust

You might need a deed of trust in various situations involving shared ownership of a property:

Joint Property Ownership

This is a classic example of when you might need a deed of trust, especially if you contribute different amounts to the purchase price or mortgage. A deed of trust outlines the co-ownership arrangement and each party's share in the property.

Friends or Family Purchases

If you're buying property together, you can use a deed of trust to define ownership percentages and financial responsibilities to avoid future disputes.

Unequal Financial Contributions

If one party contributes more to the property purchase than others, the deed of trust safeguards their higher investment in the ownership arrangement and division of profits upon sale.

Unmarried Couples

Unmarried couples can also consider a deed of trust to outline their respective shares in the property, especially when they contribute different amounts to its purchase or mortgage repayments.

Investment Properties

If several individuals come together to invest in a property, a deed of trust is necessary to define ownership stakes and divide the rental income and sale proceeds.

Property Development Projects

Entities partnering on property development and similar projects may require a deed of trust to specify ownership percentages, responsibilities, and profit sharing.

The deed of trust can also be used when one co-owner wants to sell their share of the property. The document can outline the process and conditions under which the sale occurs. It can also protect financial interests by defining ownership rights and responsibilities related to the properties.

We can provide the legal advice necessary when creating a deed of trust to ensure the document accurately reflects all parties' intentions and agreements. Our independent legal advice experts can also help you understand a deed of trust before signing one to ensure you understand your commitments.