What is a declaration of trust on a property

What a declaration of trust records

A declaration of trust records beneficial ownership, which is not what the register shows. In England and Wales a legal estate has not been capable of being held as a tenancy in common since 1925, so joint owners hold the legal title as joint tenants while their beneficial interests are held jointly or as tenants in common, in equal or unequal shares.

The deed fixes who owns what value without changing who is registered, which is where an unequal deposit or a parental contribution lands. HMRC’s test is the three certainties, meaning intention, the property and the interests it covers, and the people who hold them.

Writing, signature and the witness rule

Section 53(1)(b) of the Law of Property Act 1925 requires a declaration of trust over land to be manifested and proved by some writing signed by a person able to declare it, or by will. Section 53(2) leaves resulting, implied and constructive trusts outside that requirement.

An express oral trust over land cannot be accepted, and the writing has to show what the beneficial interests are.

There is no requirement that it be a deed, though most are. Once it is, section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 requires it to say on its face that it is a deed, to be signed before a witness who attests the signature, and to be delivered as a deed.

Joint tenants and tenants in common

Joint tenants have equal rights to the whole, while tenants in common hold shares.

	Joint tenants	Tenants in common
Shares	Equal rights to the whole	Different shares possible
On death	Goes automatically to the other owners	Does not pass automatically
Left by will	Cannot be left by will	Can be left by will
Form A restriction	Not entered when the transfer says joint tenants	Usually on the title
Form 17 for spouses	Not available	Available on unequal shares
Fee to switch	No fee	No fee

Property in two names is presumed to be held beneficially as joint tenants, and that presumption is displaced by a declaration of trust, a notice of severance, an act of severance such as bankruptcy, or evidence of a resulting or constructive trust.

The Form A restriction on the title register

Under section 78 of the Land Registration Act 2002 the registrar is not affected with notice of a trust, and practice guide 24 says references to trusts are kept off the register as far as possible.

What appears instead is a Form A restriction. No disposition by a sole proprietor under which capital money arises can be registered unless a court orders it, which enforces section 27(2) of the Law of Property Act 1925, under which capital money must not be paid to fewer than two trustees.

Applying for it is a duty, not an option. Rule 94(1) of the Land Registration Rules 2003 requires a proprietor to apply once the estate becomes subject to a trust of land other than on a registrable disposition, and executing a declaration of trust is practice guide 24’s own example. A beneficiary can apply too. Without the restriction nothing on the register stops a sole surviving proprietor selling and giving a valid receipt for the capital money.

A co-ownership trust, where the trustees and the beneficiaries are the same people, is excluded from the Trust Registration Service, so two owners with a deed between them register nothing there. Failing to register a trust that does have to be registered carries a £5,000 penalty.

The declaration of trust panel in the TR1

Every prescribed transfer and assent form, the TR1 that transfers a registered title among them, carries a declaration of trust panel with three boxes, joint tenants, tenants in common in equal shares, or some other specified trust. Leaving it blank in a transfer, an assent, form FR1 or form ADV1 means the registrar enters a Form A restriction by default.

The registrar also enters one without any application whenever two or more proprietors are registered, unless told they hold on trust for themselves as beneficial joint tenants or are personal representatives. So a Form A restriction shows only that the owners are not registered as beneficial joint tenants, and says nothing about the size of anyone’s share.

Where the third box is used the shares should be spelled out, because “as tenants in common” alone does not say whether receipts are shared equally. To see which entry a given title carries, a property summary is free and a title register costs £7.

Form 17 and the 60 day rental income deadline

For a married couple or civil partners living together, the deed alone changes nothing about the tax on rental income. That income is taxed on an even split whatever the beneficial shares until a form 17 declaration is made, with evidence of the unequal interests supplied alongside.

Condition	What it means
Made jointly	A declaration under section 837 of the Income Tax Act 2007 overrides the 50/50 rule, and both spouses must make it
Unequal shares only	It cannot be made by beneficial joint tenants, and the split can be 100/0, 60/40 or anything but 50/50
60 days	The new split runs from the last signature, if HMRC receives it within 60 days
No extensions	The limit sits in section 837(3)(b), with no power to extend, so a late form is invalid
It lapses	Death, permanent separation, divorce or dissolution, or any change in either interest or its income ends it

Siblings and other joint owners cannot make a form 17 declaration, because the 50/50 rule never applied to them and their income follows their actual entitlement.

Stamp duty when a share changes hands

Recording shares in a deed is not itself a purchase. SDLT bites when an interest in land is transferred and anything of monetary value is given in exchange, and taking on a share of the mortgage counts as that consideration, which is what makes a transfer of equity chargeable when no cash moves at all.

A transfer to a partner under an agreement or court order because of divorce, dissolution, annulment or legal separation carries no SDLT and nothing to report, and a gift with no chargeable consideration normally attracts none either.

Where consideration does pass, the residential threshold is £125,000. The higher rates apply only to a share worth £40,000 or more bought by someone who will still own another residential property worth £40,000 or more, and never to a transfer of part ownership to a spouse with nobody else involved. No capital gains tax arises on assets given to a spouse or civil partner unless the couple separated and did not live together at all in that tax year. Wales charges Land Transaction Tax instead.

Severing a joint tenancy and cancelling the restriction

Severing does not need the other owner’s agreement. Serve a written notice of severance, then file form SEV, or form RX1 where none of the SEV evidence options can be provided. Where a signature cannot be obtained, HM Land Registry accepts a letter certifying that the notice was given to the other owners, left at their last known UK address, or sent by registered or recorded delivery and not returned undelivered. There is no fee.

Going back the other way needs every owner to agree, a new or updated deed drawn, the restriction cancelled, and either a statutory declaration prepared by a conveyancer or a statement of truth such as form ST5.

HM Land Registry says anyone can do their own conveyancing, though most lenders insist on a conveyancer where a mortgage is involved, and that firm’s professional insurance is part of what a conveyancing solicitor charges for.

TOLATA claims over disputed shares

Where the owners disagree and no document settles it, section 14 of the Trusts of Land and Appointment of Trustees Act 1996 lets anyone with an interest in the property ask the court to declare the nature or extent of a person’s interest.

Section 15 sets what the court weighs, the intentions of whoever created the trust, the purposes for which the property is held, the welfare of any minor who occupies or might reasonably be expected to occupy it as their home, and the interests of any secured creditor. Section 27(3) extends the Act to England and Wales only.

Declarations of trust in Scotland and Northern Ireland

Scotland does not need this document to fix co-ownership shares, because the register does the work. Section 7 of the Land Registration etc. (Scotland) Act 2012 requires the Keeper to enter the proprietor’s name on the title sheet and, where ownership is in common, the respective shares. The term is a pro indiviso share, and there is no Form A restriction.

Survivorship runs through a destination written into the title. Registers of Scotland charges £80 per title sheet where a disposition is lodged solely to evacuate or add one, against a free severance in England and Wales. On a death the destination now takes effect by rectification of the register rather than by registering a deed.

The 1996 Act does not extend north, so there is no section 14 application in Scotland. Writing is still required where a person declares themselves sole trustee of their own property, under section 1 of the Requirements of Writing (Scotland) Act 1995. A transfer for consideration attracts Land and Buildings Transaction Tax, with nothing to pay up to £145,000, and a firm on the Edinburgh list is regulated by the Law Society of Scotland, with service complaints going to the Scottish Legal Complaints Commission.

Northern Ireland keeps the trust off the register too, but allows the shares onto it. Section 54 of the Land Registration Act (Northern Ireland) 1970 bars notice of a trust from the register, express, implied and constructive alike, while section 55 lets the owner of one or more undivided shares be registered with entries showing the share held, which the register in England and Wales never does.

Two or more registered owners are deemed joint tenants unless an entry says otherwise, and with their consent an entry can bar registration of a disposition once the number of owners falls below a specified figure, except by order of the court or the Registrar. That is the local counterpart of the Form A restriction.

The register cannot be searched online at present, so searches go by email, telephone or in person, with inspection of a folio, map or instrument at £5, an uncertified copy at £7 and a certified copy at £17. A transfer for consideration attracts Stamp Duty Land Tax at the same rates as in England rather than a devolved tax, and the regulator for a firm on the Belfast list is the Law Society of Northern Ireland.