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What happens to your property before, during and after a divorce or separation?

A main concern for people when they separate is what will happen to the property they have accrued during the relationship.  It’s no wonder then that questions around the division of property are some of the most common we are asked at Daykin Family Law.

We frequently advise on concerns related to the family home and ownership of property in the event of separation, so we’ve pulled together some of key facts you need to know about property before, during and after divorce or separation.

 

How do we go about dividing property and assets?

There are several options available when it comes to the division of assets, but for most separating couples, what happens to the family home can negotiated and agreed as part of property settlement.  There is no set way how this agreement can be reached, and often depends on reaching an outcome that suits both parties and the children, if any.

Simply put, a Property Settlement is the division of assets and liabilities between a separated couple, whether married or de facto. Property Settlement involves the division of the things you and your partner own or have an interest in.  This can include real property, businesses, shares and chattels to name a few.

If you require more information on the process and time constraints in detail, we’ve covered 8 Things You Need to Know About Property Settlement here.

 

Who pays the mortgage after separation?

At a time when budgets are often stretched, this question is a common one.  Firstly, if the mortgage is in both names (‘joint names’) then both parties are legally responsible for paying the mortgage.  If payments are not made, by either or both parties, then the bank can take steps to legally repossess the property, despite any separation or divorce proceedings that are in place.

If, in the event that one party, whether living in the house or not, refuses to make mortgage repayments, there are a number of options to consider:

  1. Contact the lending institution and inform them of the circumstances.  It may be better that they are aware of the reason for defaulted payments and may be able to reach a compromise with you on repayments pending final division of your property through the Family Court or Federal Circuit Court.
  2. If you and your partner can agree to sell the property, this will ensure the mortgage is paid.  Any proceeds following the sale can be held in a trust account until you reach an agreement with your former partner.
  3. In some circumstances, you can obtain a Court Order for spousal maintenance to force your partner to contribute to ongoing mortgage payments.

Whether you keep making mortgage payments depends on a number of circumstances.  For example, continuing to make mortgage payments can enhance your property entitlements if those payments are considered to be post-separation contributions in certain scenarios.  

In other circumstances, it can be advisable to cease making contributions where that person is no longer living at the property and has to rent new premises and lacks the capacity to make such payments.  Ultimately, the decision made surrounding mortgage payments can impact on property settlement . It is strongly advised to seek advice from a family law specialist to decide the best course of action for your individual circumstances.

 

We’ve separated.  Who stays and who goes?

In situations where one spouse is unable to live under the same roof as the other, a ‘holding pattern’ can be agreed that allows one spouse to take rented accommodation and for resources to be made available for this purpose until the property settlement is finalised.  If no agreement can be reached and neither spouse wants to leave, an application can be made to the Court for an order granting sole occupation. In order to do this, it may need to be demonstrated that it isn’t viable for both spouses to live together, and that the funds are available to fund a separate accommodation for the other party.

 

We were in a de facto relationship. Can we still apply to the Court for Property Orders?

Yes, you may be able to.  The Family Law Act 1975 contains certain mirror provisions that apply to both married and de facto couples.  An application for property settlement arising from the breakdown of a de facto relationship can be made in circumstances where:

  • the separated couple have been living together on a genuine domestic basis for two years or more; or
  • there is a child of the relationship; or
  • a party has made substantial contributions of a certain nature and serious injustice would result.

 

Can we begin the property settlement process before we divorce?

Yes, you can commence the process at any time.  A settlement can be a lengthy process, so it can be advisable to begin the property settlement process as soon as it is feasible.  Sometimes, the longer parties wait before dividing the property, the greater the chance that problems may arise, for example one of the parties could be reducing the property pool by wasting, selling or disposing of property.  

It should also be noted that the Court will usually identify and value property that exists at the date of the final hearing, meaning property acquired by the parties after the date of separation can be taken into account.

However, it is important to only begin the process when you can think rationally.  Where there is any hostility, it is advised to seek the assistance of a lawyer.  Separating de facto parties must bring proceedings for Property Settlement and/or maintenance within two years of the date separation and married couples must do so within twelve months of a divorce order taking effect.  

 

We have children.  Will this affect the property settlement process?

Putting aside the legal aspects, if you have children, this can bring an emotive aspect to considerations around property, especially in the short term.  In what is normally a turbulent time, parents should consider whether it is viable, appropriate and financially possible for one parent to remain in the family home with the children in the interim period of separation or divorce.  Some separating couples in this situation prefer the primary carer to stay in the family home to ensure continuity for the children.

While both parties may strive to ensure continued access to the family home for the children, sometimes this may not be feasible.  Many primary caregivers are not the primary income earners and may be concerned about how they might be able to make financial ends meet while maintaining continuity for the children in the family home, or how they will solely take on a mortgage.  

Alternatives such as spousal maintenance may be an option in this scenario, to ensure one party pays for particular outgoings for a period, even if they are not living in the family home. Where there are financial strains from not immediately dividing the property assets, we strongly advise getting legal advice to try and reach the most balanced outcome for both parties.

 

What do I do now?

Separation, divorce and property settlement can be one of the most emotional and financially important decisions of your life so it’s crucial to work with a lawyer with the expertise and experience you need to be able to make informed decisions about your entitlements and which course of action is best for you personally and your children.  

Daykin Family Law offers a discounted initial consultation wherein you can understand your entitlements and obligations.  We can discuss your entitlements and suggest the best course of action to settle the matter quickly and efficiently.

If you believe you can come to an amicable agreement with your partner, it is still important to have that agreement formalised in a binding and enforceable way.  Property Settlement can be a complex area of law; therefore, sound and pragmatic advice is needed to ensure that all issues are fully assessed from the outset and steps are put into place to protect you throughout your whole matter.

Each case is different and depends on the individual situation, so contact us today to start the discussion on how we can help you move your financial separation forward.

 

If you require further information on separation or divorce, check out some of our other articles:

Applying for a Divorce – What Do I Need to Know?

Family Separation & Responsibility

Am I Entitled to Spousal Maintenance?

Separation and divorce in Australia: what’s the difference?

How might separation impact my business?

Divorce and Separation

Separation and divorce in Australia: what’s the difference?

There is a misconception that a divorce will also resolve your property settlement with your ex-partner: It will not. Obtaining a divorce order will not give you finality in your financial relationship with each other.

Divorce in Australia

For divorce in Australia, parties must complete a divorce application and file it with the court.  The court will consider this material at a hearing, the date of which is set down when you file the application (usually 3 or so months after filing).  If a divorce order is granted, this will provide you with a legal separation, however it will not automatically alter your property interests under family law.

To be eligible to apply for a divorce, you must have been separated from your spouse for at least 12 months.  There can be circumstances where parties may have separated but they remain living together under the same roof for a period time or have had short periods of reconciliation and then separated again on a final basis.  You may still be eligible to make a divorce application in these situations.  You should speak to a lawyer to discuss your particular circumstances and confirm your eligibility and the court’s requirements.

Options for finalising a property settlement

Separate to a divorce, a property settlement will provide you with an alteration of property interests (for example, determining who will keep the house, or whether it needs to be sold; who will be responsible for the credit card liabilities; how superannuation will be split between you etc).  The process for finalising a property settlement will depend on whether the parties have agreed or can come to an agreement regarding how their property interests should be divided.

If both parties agree

If a separated couple agrees to alter their property interests and the terms of that property settlement, they can have a legally binding and enforceable agreement by:

  1. Entering into a binding financial agreement; or
  2. Applying to the court for consent orders.

Using either option, or in some cases both options, your lawyer will need to take your detailed instructions in relation to the property that you own (including assets, liabilities, superannuation and financial resources), the contributions made by both parties throughout the relationship and any factors which may impact on the parties moving forward (such as age, health, income disparity, care of children etc). They will assess your entitlement and confirm whether your agreement is in line with what the courts would consider is just and equitable. They will then draft the required documents for you to affect the property settlement. There will be different processes from this point depending on which option you choose: binding financial agreement or consent orders.

If both parties cannot agree

Mediation is a process whereby the parties attend upon a mediator, with or without their solicitors present, to attempt to come to an agreement about the division of their property interests. The mediator should assist the parties to keep the conversation to relevant information and work with you to generate options for terms of settlement which are acceptable for both of you.  If an agreement is reached at mediation, you can approach a lawyer to draft the relevant documents and finalise the property settlement.

Court proceedings are started as a last resort if the parties cannot agree on how to divide their property interests. Proceedings are not usually commenced without attempts to resolve the matter by way of negotiation or alternative dispute resolution as they can be costly and emotionally taxing on all parties involved.

A formalised property settlement will usually be required

It is important to finalise your financial relationship with your ex-partner.  An informal agreement, even if it is in writing, may not be binding and one of the parties may be able to make an application to the court seeking an arrangement that is different to the agreement made between you (provided they apply within the relevant time limit).  Therefore, having your agreement formalised through a binding financial agreement or consent orders is necessary to protect yourself moving forward.  A lawyer can assist you with this and guide you through this process.

Time limitation for property settlement – married couples

There is a 12-month time limitation for a married couple to apply to the court for a property settlement or for spousal maintenance after a divorce order takes effect.  Whilst the court can grant leave to apply outside of this time limit, it can be a difficult and costly process and success is not guaranteed.

In some cases, we recommend that parties enter into substantial negotiations before divorcing which often results in a resolved property settlement before an application for divorce is even made or a divorce order is granted.

What if we weren’t married?

Former de facto couples are substantially afforded the same rights under family law legislation to a property settlement as married couples.  The time limitation is different however for de facto couples, whereby they have 2 years from the date of separation to make an application to the court for property settlement or maintenance.  Like married couples, the court can grant leave to apply outside of this time limit but, again, this can be a difficult process and success is not guaranteed.

Talk to an expert

Contact Daykin Family Law to discuss your options with our Accredited Family Law Specialist & Director, Shannon Daykin.  Let us help you navigate separation, divorce and the property settlement process in a cost effective and efficient manner.