The person investing the money can very easily protect their investment by having a Declaration of Trust drawn up. This is a legal document which sets out the intention of all of the parties when the property is sold and is usually entered into prior to the purchase completing.
The Declaration is a legal document which provides how the proceeds of sale will be distributed and ensures that the investing person gets back the money they invested for the purchase.
A simple scenario would be:-
Jim buys a property for £200,000
His mum lends him £20,000 (10%) as a deposit and Jim obtains a mortgage for the remaining monies
Jim lives in the property for 3 years and then sells for £400,000
We can prepare a Declaration of Trust that provides that mum either receives her original £20,000 back on the sale or £40,000 being 10% of the sale price, to reflect her initial 10% investment.
Using the second option means that not only has mum helped Jim on the property ladder; she has also made a profit from her investment.
With the property market in parts of the country on the rise, many people are joining together with their parents to get on the property ladder before the house prices become out of reach.
Similar Declarations can be used when friends or unmarried couples are buying property together and putting in unequal amounts of the purchase monies.
Not only can the Declaration provide for how the sale proceeds are distributed, they can also make provision for one party wanting to sell the property and the other not wanting to.
Whilst when people invest money into buying property it is difficult to think anything would go wrong, the reality is that it quite often does. We see many clients who have lost money following a split or who have fallen out with their purchasing friend and want to move out of a property but their friend will not agree to sell.
If you have purchased a property without a Declaration there is no need to worry! Declarations can be drawn up with the agreement of all parties at any time.
At Attwaters Jameson Hill we are experts in advising clients about Declarations of Trust and can prepare these documents to make sure that all parties are protected should the worst happen.
If you have any enquiries about a Declaration of Trust, or a sale or purchase, please contact Debbie Barnett on 01992 568034.