Where two or more people buy a property, a trust is automatically imposed upon them without them having to do anything.

Earlier this month, Birketts’ Susan Young authored an article (‘Untangling trusts’) on the concept of a ‘trust’ in the context of estate planning and wills. But did you know that a ‘trust’ can also apply to property ownership more broadly?

Where two or more people buy a property, a trust is automatically imposed upon them without them having to do anything. The legal owners, therefore, hold the property on trust, and so are trustees. Usually the owners hold the property on trust for themselves (whether in equal or unequal shares), but they might also hold a share in the property on trust for someone else. The people who stand to benefit from the trust are known as the beneficiaries, who have the right to occupy the property and receive the net sale proceeds when the property is sold.

It is partly for this reason that your conveyancer will ask whether you wish to hold the property as ‘tenants in common' or ‘joint tenants’. A joint tenancy means that the beneficiaries own the property in equal shares, whereas a 'tenancy in common' can be in either equal or unequal shares. Therefore, if you do not wish to own the property in equal shares, you will need to choose a 'tenancy in common'.

Frequently, the respective shares in the property are declared at the time you buy the property and are set out in the transfer form that you sign. There is a panel in this form (panel 10) which contains three tick-box options from which you can select:

10) Declaration of trust. The transferee is more than one person and:

  • they are to hold the property on trust for themselves as joint tenants
  • they are to hold the property on trust for themselves as tenants in common in equal shares
  • they are to hold the property on trust: [in some other way]

If you want to the hold the property in unequal shares, you should consider opting for the third box and stating the quantum of the different shares.

Whatever you choose, ticking one of these boxes will take effect as an express ‘declaration of trust'. A 'declaration of trust' does not have to be contained in a separate standalone document, as you might think; this rather unassuming tick box panel has the same legal effect. An ‘express declaration of trust’ is usually binding. This means that subsequent changes in your relationship, such as who pays for what, are very unlikely to change your respective shares in the property, as previously declared in the transfer form.

Aside from 'express trusts', such as those referred to above, it is also possible to create other types of property trusts. For example, a ‘common intention constructive trust’ can be created without even the need to document or sign anything. This type of trust, put very simply, may be created where both parties intended to share the property, but where they did not document this formally.

You should, therefore, give careful consideration to your options when buying a property, and take legal advice if you are at all unsure – and if you already own a property, or live in a property owned by someone else, remember that you might be a trustee and/or a beneficiary of that property!