Can a declaration of trust be challenged?

A Declaration of Trust is an important document in the world of property ownership - by outlining the responsibilities and shares of each owner, it serves to protect their interests. But what if you want to challenge a declaration?

In this article we explain the process, step by step.

Declaration of Trust: Explained

A Declaration of Trust is a legally binding document that sets out the financial arrangements regarding property ownership. It's a super useful document for three reasons:

• It sets out the financial obligations of each person with a share in the property (who owes what for mortgage repayments.
• It says exactly who has a beneficial interest in the property, protecting their rights (useful for when you eventually sell the property).
• It serves as a contingency plan, outlining a course of action in case of unforeseen circumstances, like changes in ownership and disputes among the parties involved.

What makes a Declaration of Trust legally binding?

A Declaration of Trust becomes a legally binding document when the following are satisfied:

• All parties described in the document have consented to creating the legally binding agreement.
• The terms of the declaration are clearly communicated and agreed by all parties. These terms must also be capable of being performed, with vague clauses undermining the document's legality.
• All parties have the legal capacity to enter into the declaration, being sound of mind and not under duress.
• The agreement involves something of value exchanged between the legal owners, like financial contributions, responsibilities and benefits related to property ownership.
• Signatures, witnesses and registration with relevant authorities are required to enhance the document's legal standing.
• Lastly, the document needs to comply with all the laws and regulations that apply to property ownership and contracts.

Can a Declaration of Trust be challenged?

Yes! While a Declaration of Trust is a legally-binding agreement, you can in fact challenge one. If the challenge is successful, you can alter its contents with additional clauses or create a new agreement entirely.

Sometimes it's worth making a new declaration, but for small changes, you can use a Deed of Variation.

Five reasons to challenge a Declaration of Trust

While there are valid reasons for challenging a Declaration of Trust, it's important to emphasise that anyone contemplating this course of action will require legal advice. You can't approach this sort of thing without the help of a legal professional, especially if the parties involved are at odds with one another.

1. Lack of capacity

You could challenge a trust deed on the basis that one or more parties lacked the mental capacity to understand the legal implications of the document at the time of its creation. For example, an elderly person suffering from dementia may have signed the document without fully comprehending the consequences.

The party pursuing this challenge could argue that since the person was not in their right state of mind, the agreement stands on shaky grounds, and as a result, must be amended.

2. Duress or undue influence

A Declaration of Trust can also be challenged if a party believes that they were subjected to coercion, duress, or undue influence. Any such treatment would render their consent to the terms involuntary.

One scenario may see Person A, facing financial hardship, coerced by a wealthy family member, Person B, into signing a declaration that significantly favours the interests of Person B. Person B might threaten to withdraw essential financial support unless Person A agrees to the terms outlined in the document.

Person A may decide to challenge the declaration based on the fact that their agreement to the document was obtained through the coercive tactics of Person B.

3. Fraud or misrepresentation

If fraud or misrepresentation were used to obtain a party's signature in the Declaration of Trust, there is strong basis for a legal challenge.

For example, if a party engaged in phishing activities to impersonate a legitimate party involved in the declaration's creation, and the party signed the document under the false belief that they were interacting with the authentic party, this could be considered fraud.

4. Mistake

While a legal document should always be checked thoroughly, mistakes happen - and a declaration could be challenged on the grounds of mistake. This could be a mutual mistake by all parties (which makes the process of challenging and correcting the mistake much more straightforward) or a unilateral mistake that the other parties took advantage of.

5. Illegality or violation of public policy

If the trust agreement involves actions prohibited by law or goes against societal norms, a challenge can be made. For example, the declaration may seek to facilitate illegal activities or violate recognised ethical standards, providing the courts with the means to alter the terms of the property's legal ownership.

What's a Deed of Variation?

If you succeed with your challenge and the current Declaration of Trust doesn't quite fit the bill for everyone involved in the property, there's an option to go for a Deed of Variation. This document lets the parties tweak the original terms without having to start from scratch. Once everyone's on board with the changes, they sign off on the deed of variation, locking in the adjustments.

How to challenge a Declaration of Trust

While it's possible to avoid legal proceedings while challenging a declaration (especially if the parties involved are in agreement), they're unfortunately a typical part of the process. That's why it's really important to get the first step sorted - enlisting the help of a reliable solicitor.

1. Consult with a solicitor

If you want to challenge a Declaration of Trust, a solicitor is your first point-of-call, ideally one who specialises in trusts and estates. They can help you determine the grounds for challenging the trust and guide you through the legal process.

Generally speaking, the more you pay for a solicitor, the better they are - but you can expect legal fees to be in the region of £1500 - £5000. However, they can be much higher depending on the complexity of the case and the value of the property.

2. Identify the grounds for challenging

Your next step is to clearly identify and establish the grounds on which you are challenging the declaration of trust. This could include any of the reasons mentioned above, including lack of capacity, undue influence, fraud, duress, or mistake.

3. Gather evidence

The next step is to gather any evidence that supports your challenge. This may include documents, witness statements, or any other relevant information that can help support the grounds on which you are contesting the legitimacy of the agreement. Your solicitor will help direct the focus of your evidence gathering, advising you on what will best support your case.

4. Begin legal proceedings

Your solicitor will help you begin the legal process of challenging the declaration by taking out all of the necessary documents with the courts. Be on hand to help your solicitor where needed as they may regularly need your input at this stage of the process.

5. Notify parties in the declaration of your intention

At this point it's time to notify all the parties involved in the declaration about the legal challenge. They will have an opportunity to respond and present their case.

6. Possible mediation or settlement

There may be a chance to resolve the situation before going to court, but the joint tenants or owners (whoever is mentioned in the official Land Registry documents) must be in unanimous agreement for this to happen.

7. Court proceedings

The case will proceed to court, where both parties present their arguments and evidence. The court will evaluate the legal merits of the challenge and make a decision based on the available evidence.

8. Court decision

The court will make a decision based on the evidence and arguments presented. The outcome may involve declaring the declaration invalid, modifying its terms with a Deed of Variation, or upholding its validity.

Summary: Legal work for the professionals

Challenging a Declaration of Trust is a nuanced process best handled by the professionals. If you believe you have valid grounds for a challenge, it's in your best interest to engage in due process. Seek the expertise of a reputable solicitor, gather the necessary evidence, and explore alternative mediation options, if available.