When is a declaration of no interest beneficial?

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A declaration of no interest in a property is, as the name suggests, a way of legally confirming that one or more of the residents of a property has no financial interest in the property.

There are some scenarios where this might be beneficial such as:

–       For Stamp Duty Land Tax purposes, when for example, there is a Joint Mortgage Sole Proprietor such as a parent helping their child to buy a property.
–       When there is shared property income, specifically for married couples when Form 17 tax on income from buy to let property is relevant.
–       When during a divorce the judge makes an order to keep a property in joint names due to the mortgage lender’s requirements, but one of the parties has zero beneficial interest.
–       For protection when someone owns a property and their partner is moving in.

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How do you make a declaration of no interest in a property?

It is advisable to draft a legally enforceable document, even though in some scenarios, a verbal declaration can suffice. The following are some options you have at your disposal:

–       Deed of Trust – these are used when buying, or if you already own the property. This is a robust legal document which can include a variety of clauses that protect the relevant parties. These include how to sell, who pays for the property costs, who maintains the property and so forth.
–       Deed of Assignment – this is used if you already own the property and are seeking to assign a beneficial interest to someone (with the option to add in additional protective clauses such as how to force a sale).
–       Declaration of Trust – if you already own the property and are looking to assign beneficial interest to someone and don’t require any other legal protection (such as the option to force a sale). As it is not a deed, it can be disputed.

What information is included in a declaration?

The declaration will include details such as the following:

Address of the property
Names of the legal owners
Names of the beneficial owners
The beneficial share split
Date of declaration

Are there any risks of declaration of no interest in property?

You should always take legal advice from a specialist such as https://www.parachutelaw.co.uk/declaration-of-no-interest-in-property Parachute Law if you are planning a declaration, but here are some of the most common pitfalls:

–       Force a sale – A non-legal owner of a property cannot force a sale. In the example of parents helping their child to buy a property, the parents are joint borrowers on the mortgage but are not joint owners. Imagine a scenario in which the owner stops paying the mortgage, the parents may carry on paying the mortgage to protect their credit rating, but they don’t want to continue this in the long run. However, as they have no right to do so they cannot force the sale of the property.

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–       No control – If an unmarried couple break up and one party was the property owner and assigned 100% of the beneficial interest over to the other party because they weren’t working, then the party with the beneficial interest can instruct a solicitor to exercise their interest and sell the property.
–       No right to future increase in property value – even if the party with no interest in the property puts further investment into the property later down the line, then they will still have no interest in the property. Under these circumstances, an alternative arrangement such as a loan agreement may have been preferable.

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