Drawing up deeds of trust

One area of residential conveyancing which crops up oft en is the issue of deeds of trust. In many cases fi rst time buyers may be using funds obtained from parents to assist with their purchase and, usually, in my experience, this is by way of a gift. However, sometimes the balance of funds from parents can require a deed of trust. A deed of trust may also be required in situations where two or more buyers are contributing unequal shares to a purchase. This seems rather straightforward, doesn't it?

I was recently instructed by a couple who had purchased their property using a mortgage and the proceeds of sale of another property. However, the sale property was actually owned by one of the clients and her father who obtained that property by way of a right-to-buy scheme.

Their acting solicitors at the time of the sale and purchase made many errors during the transactions. Among other things, they failed to advise that a confl ict of interest had arisen and that the parties ought to obtain independent advice, and they continued to act for all parties without obtaining their full and informed consent to do so. They also failed to prepare and arrange execution of - and advise on - the contents and suitable and eff ective documentation setting out the parties benefi cial interest and/or rights of residence, and failed to advise of the risks of proceeding without any suitable and effective documentation or at least a proper record of the arrangement between the parties. As a result, they exposed our clients to the unnecessary risk of a claim to a beneficial interest on the basis of resulting trust. Altogether, this was a recipe for litigation, and a claim is now being made against my clients for a sum equal to the value of the father's beneficial interest by the father.

What this case has emphasised is the requirement for residential conveyancing practitioners to consider all possibilities and protect their clients in the best possible way. The solicitors in this case did not advise on the risks of using the full proceeds of sale for the purchase where one seller was not involved in the purchase property. A deed of trust may not have prevented my client's current predicament - that is, even under a deed of trust the father could still claim for an order for sale to realise his interest in the property - but it would have given boundaries and structure to such a claim and situations where a claim could arise.

Similarly, in another case I am currently dealing with a couple, due to be married, bought a property. However, as one of them was a student at the time, only one of them (my client) obtained the mortgage and was the registered proprietor. The solicitors acting at the time, correctly advised that a deed of trust should be used between the two of them as the other party had contributed savings to the purchase.

Subsequently, the relationship broke down and my client came to me to see about determining the trust (her original solicitors had been closed down). On review of the trust document I noted that it required that each party hold the benefi cial interest in equal shares. According to my client this did not represent the contribution made by her partner at the time which was more like five per cent and not 50 per cent.

Subsequent negotiations have allowed me to get a satisfactory result for my client but, again, it is a situation she should not have been in.

It is our responsibility to ensure that when we deal with a transaction that we look at all the information and consider the effect on the client. I have often had the difficult conversation with a married or unmarried couple about being tenants in common and (if there is to be an unequal contribution of funds) deeds of trust: what if they split up? It is also our responsibility to ensure that the documentation we produce is correct and refl ects the client's requirements after considering all the advice given. Don't just print off the firm's precedent. Read it and make sure it doeswhat is required.

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