Free Declaration of Trust Template

THE PROPERTY

The Trustees are the registered joint proprietors at law of the Freehold property known as:

42 Birch Lane, Leeds, LS1 2AB

registered at HM Land Registry under Title Number: YK123456, acquired at the purchase price of 360,000.00 GBP (the "Property"). The Trustees hold the legal estate on trust of land within the meaning of section 1 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).

DECLARATION OF TRUST AND BENEFICIAL SHARES

The Trustees declare that they hold the Property on trust for themselves as tenants in common in equity in the following undivided shares:

   (a) James Harrington: 60%;
   (b) Sophie Clarke: 40%.

Any beneficial joint tenancy that may have existed in equity prior to this Declaration is hereby severed under section 36(2) of the Law of Property Act 1925 and the Trustees hold as tenants in common thereafter. The right of survivorship shall not apply to the beneficial interest and each Trustee's share shall form part of their estate on death.

FINANCIAL CONTRIBUTIONS

The Trustees acknowledge and record the following initial financial contributions to the acquisition of the Property:

   (a) James Harrington: 54,000.00 GBP;
   (b) Sophie Clarke: 36,000.00 GBP.

These contributions form the basis on which the beneficial shares in Clause 2 have been agreed. Written evidence of the contributions (bank transfers, completion statements, mortgage statements) shall be retained by each Trustee.

TRUSTEES' DUTIES AND POWERS

The Trustees shall exercise their powers under the Trustee Act 1925, the Trustee Act 2000 and TOLATA 1996 in accordance with the statutory duty of care (Trustee Act 2000 s.1) and in the best interests of the beneficiaries. In particular, the Trustees shall: (a) consult one another before exercising any of their functions as trustees, so far as practicable, and give effect to the wishes of the majority according to the value of their combined interests (TOLATA 1996 s.11); (b) procure and maintain buildings insurance on terms reasonably acceptable to both (Trustee Act 2000 s.34); (c) not knowingly cause or permit the Property to become subject to any further mortgage, charge or encumbrance without the prior written consent of the other Trustee; and (d) cooperate in good faith in the day-to-day management of the Property.

RENTAL INCOME

Any rental or other income derived from the Property shall be divided between the Trustees in proportion to their beneficial interests as declared herein: James Harrington 60%; Sophie Clarke 40%. Each Trustee shall be responsible for accounting for their own share to HMRC under ITTOIA 2005 Part 3. Where the Trustees are spouses or civil partners living together, they may elect under HMRC Form 17 for the actual beneficial shares to apply for income-tax purposes rather than the default 50/50 under section 837 of the Income Tax Act 2007.

MORTGAGE AND OUTGOINGS

Mortgage payments, ground rent, service charges (where applicable), buildings insurance, council tax and all other outgoings shall be shared between the Trustees in proportion to their beneficial shares: James Harrington 60%; Sophie Clarke 40%. Any arrears attributable to one Trustee shall be treated as a debt owed by that Trustee to the other.

The Property is subject to a mortgage with Halifax Building Society in the principal sum of 270,000.00 GBP. The Trustees shall cooperate in maintaining the mortgage in good standing and neither shall cause default without the prior written consent of the other.

MORTGAGE INTEREST TAX TREATMENT

Any tax credit available in respect of mortgage interest on the Property (subject to the restrictions under section 24 of the Finance (No. 2) Act 2015) shall be apportioned between the Trustees in proportion to their beneficial shares: James Harrington 60%; Sophie Clarke 40%. Each Trustee is responsible for making the appropriate claim in their own self-assessment tax return.

SALE OF THE PROPERTY

On any sale or disposal of the Property, the net proceeds (after discharge of all secured liabilities, reasonable sale costs including estate-agency and conveyancing fees, and any capital gains tax attributable to the disposal) shall be applied as follows: first, each Trustee shall be reimbursed their initial financial contributions and any documented capital improvements under Clause 9; second, any surplus shall be divided between the Trustees in proportion to their beneficial shares (60% / 40%). If the net proceeds are insufficient to reimburse all initial contributions in full, the shortfall shall be shared proportionally to the beneficial shares.

CAPITAL IMPROVEMENTS

A Trustee who funds a capital improvement to the Property from their separate resources shall have the amount of that funding treated as an additional financial contribution under Clause 3. On any sale or accounting, the documented capital improvements shall first be reimbursed to the funding Trustee before the balance is divided in accordance with Clause 8. No Trustee shall be entitled to any uplift in the beneficial shares declared in Clause 2 by reason of such funding, save with the prior written agreement of the other Trustee.

TRANSFER OF BENEFICIAL INTEREST

Neither Trustee may sell, transfer, assign, charge or otherwise dispose of their beneficial interest in the Property without first offering that interest in writing to the other Trustee at fair market value. The market value shall be agreed between the Trustees or, failing agreement within 14 days, determined by an independent RICS-registered valuer jointly instructed (or appointed by the President of the RICS on application). The other Trustee shall have 30 days from receipt of the valuation to accept in writing. If the right of first refusal is not exercised within that period, the offering Trustee may proceed with a transfer to a third party on terms no more favourable than those offered. Any disposition of an equitable interest must comply with section 53(1)(c) of the Law of Property Act 1925.

LAND REGISTRY PROTECTION

The Trustees shall apply to HM Land Registry, within 30 days of the date of this Declaration, to enter a Form A restriction on the title of the Property under section 44(1) of the Land Registration Act 2002 and rule 94 of the Land Registration Rules 2003 (SI 2003/1417), in the form prescribed by Schedule 4 of the 2003 Rules:

"No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court."

This restriction preserves the overreaching protection intended by TOLATA 1996 and section 2 of the Law of Property Act 1925 and alerts third parties to the existence of the trust.

In addition, a Trustee shall be entitled at any time to apply for entry of a unilateral notice (Form UN1) under section 34 of the Land Registration Act 2002 to protect their beneficial interest on the register.

DISPUTE RESOLUTION (TOLATA 1996)

Any dispute arising out of or in connection with this Declaration shall first be referred to mediation. The Trustees shall attempt to agree upon a mediator within 14 days of written notice of dispute; failing agreement, either Trustee may request appointment by the Centre for Effective Dispute Resolution (CEDR) or the Royal Institution of Chartered Surveyors (RICS) Dispute Resolution Service. If mediation fails or is not concluded within 60 days, either Trustee may apply to the courts of England and Wales under section 14 of TOLATA 1996 for an order for sale, partition or a declaration of the parties' respective interests. The court shall have regard to the factors listed in section 15 TOLATA 1996.

DEATH, TAX, CAPACITY AND FAMILY-LAW MATTERS

(a) Death: on the death of a Trustee (where tenants in common), the beneficial interest of the deceased forms part of their estate and devolves in accordance with their will or the intestacy rules (Administration of Estates Act 1925; Inheritance and Trustees' Powers Act 2014). The survivor shall cooperate with the deceased's personal representatives in any necessary registration at HM Land Registry and any resulting sale or transfer.

(b) Inheritance Tax: transfers between spouses and civil partners are exempt under section 18 of the Inheritance Tax Act 1984. Where one Trustee retains a benefit from property gifted, the Gift with Reservation rules (section 102 of the Finance Act 1986) may apply.

(c) Capital Gains Tax: each Trustee shall account for CGT on their own beneficial share on any future disposal (TCGA 1992 s.60). Spouses and civil partners may transfer between themselves on a no-gain / no-loss basis under section 58 TCGA 1992. Private Residence Relief may be available for a Trustee occupying the Property as their main residence (TCGA 1992 ss.222-226).

(d) Stamp Duty Land Tax: a declaration of trust without chargeable consideration is generally outside the scope of SDLT (Finance Act 2003 Part 4 + Sch 3). Where chargeable consideration arises (for example, the assumption of mortgage debt), specialist advice shall be obtained.

(e) Matrimonial / family override: the Trustees acknowledge that the declared beneficial shares may be overridden by order of the court under the Matrimonial Causes Act 1973 (ss.24-25), the Civil Partnership Act 2004 or Schedule 1 to the Children Act 1989.

(f) Capacity: each Trustee confirms that they have capacity to enter into this Declaration within the meaning of the Mental Capacity Act 2005 and has received, or had the opportunity to receive, independent legal and tax advice before signing.

(g) Forfeiture: the Forfeiture Act 1982 is acknowledged as applying in any case where one Trustee unlawfully causes the death of the other.

AMENDMENT AND VARIATION

This Declaration may be varied or amended by written agreement signed by both Trustees. Any variation constituting a disposition of an equitable interest must comply with section 53(1)(c) of the Law of Property Act 1925 (writing signed by the person disposing of the interest). An amended Declaration supersedes all prior declarations in respect of the Property to the extent of any inconsistency.

GOVERNING LAW AND JURISDICTION

This Declaration and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it shall be governed by and construed in accordance with the law of England and Wales. Subject to any agreed mediation step, the Trustees submit to the exclusive jurisdiction of the County Court at ________ or the High Court of Justice (Chancery Division).

GENERAL

(a) Entire agreement: this Declaration constitutes the entire agreement between the Trustees in relation to the beneficial ownership of the Property and supersedes all prior discussions and documents.
(b) Severability: if any provision is held invalid or unenforceable, the remaining provisions shall continue in full force.
(c) Third-party rights: a person who is not a party to this Declaration has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms, save in respect of a personal representative of a deceased Trustee.
(d) Counterparts: this Declaration may be executed in any number of counterparts, each of which when executed shall constitute an original, and all counterparts together shall constitute one and the same instrument.
(e) Execution as a deed: this Declaration is executed and delivered as a deed on the date first written above under section 1 of the Law of Property (Miscellaneous Provisions) Act 1989. The limitation period for any claim under this deed is 12 years (Limitation Act 1980 s.8).