What does a Deed of Trust include?
Rather than just stating who owns what, a Deed of Trust goes further by recording each person's beneficial ownership, how deposits and mortgage payments are split, and what happens to the money if the property is ever sold or one owner wants to buy the other out. Overall, it explains exactly what you're entitled to and when.
A Deed of Trust includes several key financial elements:
Beneficial ownership
A beneficial ownership is your right to the financial value of a property, even if your name isn't on the official title deeds. This includes a share of any rental income and a share of the proceeds if the property is sold.
It's different from legal ownership, which is simply whose name appears on the property's title. You can hold a beneficial interest without being a legal owner, and there's no limit on how many people can hold one.
Deposits
A Deed of Trust records exactly how much each person contributed towards the initial deposit of the property. This could include savings built up through a Lifetime ISA, which many buyers use towards their deposit with the added benefit of a government bonus. If the deposit contributions made weren't equal, it can set out that the person who paid more, gets that extra amount back first if the property is sold, before any remaining money is split between the owners.
Mortgage payments
Ongoing mortgage payments, including interest and capital repayments, can also be recorded within a Deed of Trust. It's worth noting that being named on the mortgage isn't the same as being a beneficial owner where you can contribute more towards monthly payments without being named a borrow, and a Deed of Trust is exactly what's used to reflect that. Any extra contributions made over time can then be factored into how the proceeds are divided if the property is sold.
Sale proceeds
When a property is sold the proceeds aren't automatically split down the middle. A Deed of Trust sets out exactly how that money should be divided between owners. Once the mortgage, fees, and other expenses have been paid off, the remaining net cash is divided according to what's been agreed, whether that's fixed percentages, a return on the initial deposit, or a custom formula written into the deed itself. For example:
Emma and James buy a property together for £400,000. Emma puts in a £70,000 deposit, whilst James contributes £20,000, and they agree to split the mortgage payments equally. Their Deed of Trust states that if the property is sold, Emma will receive her extra £50,000 back first, reflecting the difference in their deposits, before any remaining equity is split equally between them.
This way, both Emma and James’ contributions are properly recognised, and there’s no ambiguity over who’s owed what if they ever decide to sell.
Buy-out arrangements
A buy-out arrangement acts as a pre-agreed rulebook, dictating how one co-owner can buy the other’s share. This typically covers:
Trigger events: the specific circumstances that can set the process in motion, such as relationship breakdown, one party voluntarily wanting to leave, an owner’s incapacitation or death, or a deadlock where co-owners can’t agree on how the property is managed.
Valuation method: how the property’s value is assessed at the time, including who carries it out, such as an agreed local estate agent or independent surveyor, when the valuation takes place, and how any disagreement over the figure would be resolved.
Buy-out price calculation: working out what’s owed to the departing owner by returning their original deposit or any capital improvements they’ve paid for, deducting the outstanding mortgage and selling costs, then applying their exact ownership share to what’s left.
Payment terms: the timeframe agreed for completing the buy-out, whether the remaining owner pays as a cash buyer or through a remortgage, and what happens if the buyer can’t secure the funds in time.
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