A declaration of no interest in a property is a way of legally indicating that one or more occupants has no financial interest in the property.
There are a variety of potential scenarios in which this may make sense, 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 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 reflective of 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.
Examples in more detail
Stamp Duty Land Tax Purposes
Jointly buying a property with your parents or an unmarried partner is a common occurrence due to ever-increasing house prices. However, if any of the joint owners are not first time buyers, then stamp duty will be payable.
For first time buyer relief, you must not have previously owned a property either alone or with others and if the property is being purchased jointly, then all of the purchasers must meet these conditions. The maximum stamp duty relief available is £5,000.
A declaration of no beneficial interest can be drafted to confirm that the parties who have previously purchased a property have no interest in the property, which will avoid stamp duty implications. A declaration of no interest or a deed of trust will confirm you have no beneficial interest, but a deed of trust may be more robust than a declaration of no interest in a property.
Property Income Tax Purposes
Property income can be shared between married couples in a tax-efficient way. If both parties in a marriage are on the legal title, then HMRC requires the arrangement to be formally documented using a Form 17. Evidence that your beneficial interests in the property are unequal needs to be provided, which is where a https://www.parachutelaw.co.uk/declaration-of-no-interest-in-property declaration of no interest in property or deed of trust comes in.
Divorce proceedings
A judge may make an order during divorce proceedings that the family home must remain in the joint names of the couple but that the property is beneficially owned by just one of the parties. Usually, as part of the process, an order will be completed which confirms which party has no beneficial interest and the future date at which their name can be taken off the legal title. This occurs commonly when one parent remains with under-age children in the family home.
Protection
Unmarried couples are advised to use a declaration of no interest in property when they start living together if the property is owned by one party.
The partner who moved in could make a claim in the future on the value of the equity in the property if they have made contributions to the property such as payments towards the bills, mortgage or towards a lump sum off the mortgage. One party may see this as giving them a beneficial interest in the property but the other may view these payments as some form of rental payment. If the couple separates, then the party who isn’t an owner can instruct a solicitor to make a claim to prove their beneficial interest in the property. They wouldn’t have been able to do so if they had signed a declaration of no interest.