Why do I need a Declaration of Trust?10/10/18
Capsticks’ new Associate Puja Solanki specialises in GP partnership law. To welcome Puja to the firm we asked her to address some of the most common questions we receive on this topic from GPs and Practice Managers. If you would like to discuss your current partnership or property arrangements with Puja then please don’t hesitate to get in touch.
What is a Declaration of Trust?
Puja: Premises form one of the most valuable assets of any medical practice. If you have chosen to regulate your business with a partnership deed then it is good practice to regulate ownership of your property with a ‘Declaration of Trust’. A declaration of trust is a document made between the co-owners of a property to record the owners’ shares, rights and obligations of the property.
But why do property arrangements need to be documented separately?
Puja: Although property provisions are typically incorporated in a partnership deed, if a new partner joins the partnership who is not bound into the deed (which happens frequently!), problems can arise. The arrival of a new partner means that the provisions of the existing partnership deed become invalid including those that relate to the property. The benefit to your partnership of having a separate declaration of trust in place is that the intentions of the partners relating to the property are still protected.
Are there any other benefits?
Puja: Yes. An additional benefit of having a Declaration of Trust relates to practices where not all of the partners own the property. If the partners who own the property have a declaration of trust in place, there will be clarity around the distinction between the governance of the freehold ownership and the occupation of the property which will avoid any potential for disputes in the future.
What should a Declaration of Trust include?
Puja: A well-drafted Declaration of trust should not only include how the co-owners hold the property and in what shares but also should address the rights and obligations of the owners. This will include how income from the property and expenses of the property are shared, valuation provisions, procedures for purchasing a retired or deceased partner’s share of the property, and how decisions are taken in respect of the property (to name a few!).