It’s something we don’t want to think about, but divorce has some significant implications on the family home and assets, along with the emotional stress. What happens to an existing home will depend on the divorcing couple, but here’s some tips to help make the process of moving on a bit gentler.
Identify and value all assets
All assets will need to be identified and valued as part of the process of determining what there is to divide up. The home and any other properties will be included in this; regardless of whose name the property is in. There is no formula in Australia for setting out how assets are to be split on divorce, however it’s fair to start at 50:50, then look at the other factors to try to get to an outcome that meets the needs of the couple, any children and is as fair as possible. Many of our clients have been in this situation and have utilised the services of O’Sullivan Davies Lawyers.
What are the options?
There are a few options when it comes to the family home. An option is for one spouse to buy the other out and keep the house or the property could be sold and the proceeds split. If there are children, a parent will often want to stay put to preserve as much continuity as possible. When this is the case, the other partner may receive other assets to even up the distribution, or may agree to defer receiving the balance until the property is sold when the children move out or the partner remarries. This is commonly known as a Mesher Order.
The downside with a traditional Mesher Order is that both parties then remain on the mortgage which often makes it very tricky for the person who has moved out to obtain another mortgage to buy elsewhere. A more complicated form of Mesher Order involves the transfer of the house and the mortgage into the name of the primary carer, but with the other spouse retaining a percentage interest in the house, secured by way of a second mortgage in their favour. This is known as a deferred charge Mesher.
Valuing the home
Whatever option is elected; the property will need to be valued for the settlement. If a couple can’t agree upon a value, the court will order a joint report from a local real estate agent or surveyor. They will be instructed by the parties jointly and they have a duty to the court to report accurately. The figure given will be a market valuation, i.e. what the expert thinks the property would sell for rather than a suggested asking price.
Valuations can be updated if there is a significant fall or rise in the market, but changes in prices can be factored in from the start.
Marrying or divorcing does not alter your ‘face value’ property rights. It doesn’t change who owns what at the Land Registry, but being married creates obligations to each other. As a result, the court has the power to make orders against any property, regardless of how it is owned. Even if a home is only in the name of one spouse, if it is the marital home, the other has a legal right of occupation for as long as they remain married to each other. It would be unusual for each party not to receive at least some share of the equity, even if the house was only in the name of one of them.
After a marriage breakdown, a partner who lived in a house which was in the sole name of his or her spouse should act quickly. You should protect your position as soon as possible by entering a Notice of Home Rights against the property with the Land Registry. This should prevent your spouse from selling the property without your knowledge or consent whilst you remain married.
When it’s time to move on
If you do not have children, or you have decided the best option is to sell the family home, this may bring additional challenges.
Selling a property in the current market can be difficult, or mean that a loss could be made on the home. This leaves you with a choice of holding onto a home you no longer want, or reducing your price for a quick sale.
When it comes to finances, even if you are receiving regular maintenance from your ex-partner, you will need to search carefully for a lender willing to take it into account. Lenders have very different ways of treating maintenance payments. For more information on lenders that can help in this situation, Audrey Greipl from Ashblue Finances will be happy to assist.
On the plus side, the current buyers’ market may help you acquire a property for less, so it certainly is a two-way street.
It’s crucial to engage a real estate agent who is experienced in dealing with divorce and can help you through the process. Speak to a Naked Agent today.