Why do I need a Declaration of Trust?17/05/21
Premises form one of the most valuable assets of any medical practice. Just as it is essential to regulate your business with a partnership deed it is also good practice to regulate your property arrangements with a ‘declaration of trust’. We have addressed some of the most common questions we receive on this topic from GPs and Practice Managers.
Q: What is 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. It will also include provisions on each partner’s ability to sell their share on retirement or death.
Q: But why does this need to be documented separately?
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.
Q: Are there any other benefits?
Yes. An additional benefit of having a declaration 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.
Q: What should a Declaration of Trust include?
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!).
How Capsticks can help
We are experts in preparing contractual documents, and frequently assist property owners by preparing a new declaration of trust to govern the ownership of GPs premises. We also handle other partnership documents, such as partnership deeds, and can document the engagement of new partners. If you are a new partner who is looking to join a partnership or a practice that has undergone changes, we can conduct a ‘Health Check’ of your partnership deed.
If you would like to discuss your current partnership or property arrangements, please contact Puja Solanki, to find out more about how Capsticks can help.