A Deed of Trust is typically a formal document prepared by a solicitor during the conveyancing process. Here’s a structural breakdown of the key clauses found in a template:
1. Parties and Recitals
Date: The date the Deed is signed and executed.
The Parties (Trustees and Beneficiaries): Full legal names and addresses of all owners (who are typically both the Trustees who hold the legal title and the Beneficiaries who are entitled to the financial value).
The Property: The full address and official title number of the property being declared in the trust.
Recital of Purchase: A declaration confirming the date the property was purchased and the total purchase price.
2. Declaration of Trust
This is the core clause that dictates the legal form of ownership.
Legal Ownership: A statement that the parties hold the property as Trustees for themselves as Beneficiaries.
Method of Ownership: A declaration of whether the parties hold the beneficial interest as:
Joint Tenants: Owners equally share the property (usually 50/50), and if one owner dies, their share automatically passes to the surviving owner(s) (this is the simplest form and rarely requires a detailed Deed of Trust for sale proceeds).
Tenants in Common: Owners hold distinct, defined shares (e.g., 60% and 40%). If an owner dies, their share passes according to their Will, not automatically to the other owner(s). A Deed of Trust is essential when owning as Tenants in Common.
3. Financial Contributions and Division of Proceeds
This is the most critical and bespoke section, detailing the financial arrangement. It outlines the formula for dividing the sale proceeds.
Initial Contributions: A record of the specific monetary amount contributed by each party towards the deposit and purchase price.
Repayment of Contributions: A clause stating that upon the sale of the property, the initial contributions (often called the “Initial Loan” or “Capital Contribution”) recorded in the Deed must be repaid to the original contributor(s) first.
Division of Remaining Equity: A clause specifying how the remaining profit (the Net Proceeds of Sale after mortgages and legal fees are paid, and initial contributions are repaid) will be divided. The division can be based on:
Fixed Percentages: (e.g., Party A gets 60% of the remaining equity, Party B gets 40%).
Defined Ratios: (e.g., Proportional to the ratio of their initial contributions).
4. Responsibilities and Outgoings
This optional, but often included, section clarifies running costs while owning the property.
Mortgage and Interest: Who is responsible for the mortgage payments and in what proportion.
Maintenance and Bills: How costs such as insurance, maintenance, repairs, and council tax will be split between the owners.
5. Signatures and Execution
Signatures: Signatures of all parties.
Witnessing: The document must be signed as a Deed, which means it must be properly witnessed by an independent person who is not a party to the Deed.