Who can benefit from a floating deed of trust?

This type of document helps clarify more accurately individuals’ beneficial interest in a property and is useful when there are joint owners.

Beneficial interest references the money owned by each party, and the Deed outlines individuals’ contributions at a particular time. You might know a floating deed of trust as just that, or you might have heard it referred to as a Silver deed, a Deed of Trust, or a commensurate share deed. They are different names for the same document which aims to remove ambiguity around financial interest in a property by recording all financial arrangements relating to it.

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It is legally binding and is used when the property has joint owners. It can also record the interests of anyone else involved financially. By the time the property comes to be sold, the document calculates what each party’s previous contributions amount to, giving a value if one party were to buy out the other.

Who benefits from this document?

Everyone should benefit because ambiguity is removed and calculations can be made fairly. Anything that can minimise the risk of disagreements in the future has to be a positive for all parties. There are scenarios wherein the deed of trust is especially helpful, such as co-habiting couples who are not married, especially if one is making significantly higher financial contributions towards repaying the mortgage.

It can also be helpful for individuals who are not in a romantic relationship but are investing together; friends or siblings, for example. The Guardian explains a little more about why a Deed can be helpful for friends or flat-mates. Finally, it is often very helpful where a party has had financial help in the form of a loan from family members, e.g. parents. It safeguards that loan so that it is repaid once the property has been sold or refinanced.

What about floating shares?

The simple declaration takes into account just the contributions made by each side and calculates the percentage breakdown from that. Once a sale has completed, proceeds are split between the parties involved using that percentage.

How do I draw up a deed of trust like this?

A solicitor specialising in property or conveyancing will be able to advise you on the best course of action. They will also advise on whether or not the simpler deed of trust or more complicated floating deed is more appropriate to your circumstances.

There is a wealth of information available online to allow you to research the subject fully so that you can ask any pertinent questions.

Before making any sort of financial commitment of this scale and investing in property, we recommend that you seek appropriate professional advice from legal experts such as https://www.parachutelaw.co.uk/floating-deed-of-trust Parachute Law, and consult with your financial adviser.

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Things aren’t always cut and dried, however, and by the time parties come to sell a property, there might have been several changes in personal circumstances along the way. For example, it’s unlikely that both parties would be earning the exact same income throughout the life of the ownership, so contributions from each side might have varied, leaving the total amounts paid differing significantly. The floating shares element in the declaration offers greater flexibility and is designed to take into account changes in circumstances just like this. You can also take into account costs such as repairs, though trying to do that yourself can start to become complicated.

As both parties will need to sign the document, it makes sense to include them throughout the process. Once agreed, contact a lawyer to formalise the arrangement.

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