Buying a home with unequal deposits: why a deed of trust matters

What happens without one

When two people buy a home in joint names, the courts start from the position that they own it equally. That’s the effect of the House of Lords’ decision in Stack v Dowden (2007). Someone who paid more can try to prove a different intention, but it means a court claim that is slow, stressful and expensive, and the outcome is uncertain.

This matters most for unmarried couples, friends and relatives, who don’t have the financial claims married couples have on divorce. For them, property law decides who gets what.

Joint tenants or tenants in common?

There are two ways to own a home together:

• Joint tenants own the whole property together, with no separate shares. If one dies, the other automatically inherits it, whatever their will says.
• Tenants in common each own a share, which can be unequal. Each share passes under the owner’s will.

To own unequal shares, you need to be tenants in common. HM Land Registry shows this with a “Form A” restriction on the title. A joint tenancy can usually be converted later.

What a deed of trust can cover

• Your shares: fixed percentages, or a formula such as “each gets their deposit back, then the rest is split equally”
• Mortgage payments: how unequal payments over time are credited
• Improvements: whether money spent on an extension or a new kitchen increases someone’s share
• Selling: when either of you can force a sale, and the notice needed
• Buy-outs: how one person can buy the other out, and how the property is valued
• If someone stops paying: what happens to their share

An example

Sam and Alex buy a £300,000 flat. Sam puts in a £60,000 deposit and Alex £10,000, with a £230,000 mortgage. A few years later they split up and sell for £340,000, with £220,000 left on the mortgage, leaving £120,000.

• Without a deed of trust: the starting point is £60,000 each, so Sam loses most of the extra deposit unless they can prove a different intention in court.
• With a deed saying deposits come back first: Sam gets £60,000 and Alex £10,000, and the remaining £50,000 is split equally. Sam receives £85,000 and Alex £35,000.

Simplified: it ignores selling costs and any other contributions.

When family help with the deposit

If a parent or relative gives you money, decide whether it’s a gift or a loan, and whether they expect a share of the home. Lenders usually ask for a gifted deposit letter confirming the giver has no interest in the property, so a deed of trust giving them a share has to be agreed with your lender first. Some lenders won’t accept it.

The mortgage comes first

A deed of trust only governs things between the owners. Your lender’s rights come first: on a sale, the mortgage is paid off before anyone receives their share, and you each remain liable for the whole mortgage.

Independent legal advice

If the deed treats you differently, for example because it protects the other person’s larger deposit, it’s sensible for each of you to have separate advice. That helps show later that you understood it and signed freely. See ILA on a deed of trust.