D Flashcards
What is a Deed of Trust?
A Deed of Trust “DOT” (also known as Declaration of Trust) is a deed that joint owners can enter into to set out the terms of their financial arrangements and anyone else’s financial interests in the property.
What can be included in a Deed of Trust?
1) How much money one or each of the tenants initially put into the property.
2) What % of the sale proceeds should go to who after the initial deposits are repaid.
3) Anyone else financial interest in the property e.g Gifted Deposit, Dependent Interest etc..
4) How much each tenant will pay towards the mortgage
What is the advantage of entering into a Deed of Trust?
The advantage of tenants entering into a Deed of Trust is that it can remove uncertainty regarding the financial arrangements.
How is a Deed of Trust protected?
- At the very minimum a DOT will be protected by the Land Registry by a Form A Restriction entry on the register of the property.
However other restrictions can be put in place to protect it a DOT:
- A conveyancer to certify the terms of a DOT have been complied with
- A Statement of Truth/Statutory Declaration from the proprietors confirming that the terms of a DOT have been complied with.
- Consent from the beneficiaries of a DOT
What are the risks of getting it wrong with a Deed of Trust?
If prior to exchange/completion we have not had the relevant confirmation/documents in place to overreach the Form A Restriction (or any other restrictions protecting a DOT) then registration could be delayed or worst-case scenario, impossible. This could result in;
- Being removed from Mortgage Lender panels as we are not able to register their first legal charge.
- Client complaints
- Professional Indemnity Claims & Increased Premiums
Angry Relatives: If the terms of a declaration of trust have not been complied with (especially if we have certified to HMLR that they have complied) then the relatives who should have been a beneficiary of the sale proceeds could have a claim against.
