FAQ: Transferring or Selling Your Co-owned Property During a Divorce Settlement

Having an emotional attachment to your family home is normal.  It’s most likely somewhere you have lived for several years. You’ve put your heart and soul into renovating, decorating and organising and had expected to be living at this residence for many years to come in the future.  The very last thing you want to do is move to an unfamiliar location.  However, this is something every couple faces when they separate, because at some stage, at least one of you has to move out in order for both of you to move forward.  This is often easier said than done, and we see clients really struggling with this decision and with taking steps to put it in action. 

We have detailed a few questions below that we get asked about property settlements in the divorce process to get you started thinking about this issue or to assist in having the difficult discussion with your Ex.

1. What are my options when it comes to dealing with the house?

There are usually two options when it comes to dealing with the house:

• One party retains the house and has the property transferred into their name.  This also involves them transferring any mortgage on the property into their sole name, as well as borrowing additional funds for a cash payment to the other party to ‘buy them out’ of the property for whatever the agreed division of the property pool requires.  The cash payment is not always necessary if there are enough other assets within the property pool for the other party to take in lieu of a cash payment.
• The house is sold and the sale proceeds are divided between the parties as agreed, taking into account other items each party is retaining from the property pool as well. 

2. How do I decide which option is best suited for me and my Ex?

This is usually determined by whether one party has the borrowing capacity to retain the house by themselves or not.  To figure out whether it is a viable option for you to keep the family home, we recommend that you speak to a bank or mortgage broker to ascertain if you are able to afford to take on the mortgage by yourself and how much you are able to borrow.  Any such conversation with the bank should also include the possibility of a cash payment to the other party including an estimated amount of the cash payment, to get an idea of whether you will be able to borrow enough to ‘buy out’ your Ex. 

If you do find out you have the borrowing capacity to keep the property, have the mortgage transferred into your name, and meet any potential cash payment to your Ex – then we recommend that the next step is making a budget and ensuring that you will be able to meet the new mortgage repayments comfortably on your salary and still have enough funds for all the other things you like to spend your money on.  It is important to make sure that keeping the family home is the best option for you and one that you will be able to maintain while still keeping the lifestyle you want moving forward.

3. What do I need to consider if the property is being transferred to me or my Ex?

If you and your Ex ultimately decide that one of you will retain the property as part of the family law property settlement, then here are a few considerations to keep in mind:

• Make sure that your agreement is formalised by way of Consent Orders or a Binding Financial Agreement.  If your property is transferred in accordance with one of these formalised documents, then you may be able to claim some tax exemptions on the transfer of the property, such as a stamp duty exemption.  If you see a lawyer, they will be able to draft the appropriate document for you and provide you with advice as to these exemptions. 
• Give yourselves a realistic timeframe for the transfer to take place, to ensure that the party retaining the property has enough time to obtain the necessary finance. 
• Consider including a default clause in your Consent Orders or Binding Financial Agreement, which provides for the property to be sold, just in case the party retaining the property is unable to obtain the necessary finance for the mortgage to be transferred into their name, or to pay the cash payment.

4. What do I need to consider if we are selling the property?

If you and your Ex ultimately decide to sell the property as part of the family law property settlement, then here are a few considerations to keep in mind:

• Speak to a few real estate agents to find one that both you and your Ex are comfortable with and that understands your situation.  The real estate agent should be alerted that as the property is being sold for a family law matter, they need to obtain joint instructions from both of you prior to taking any steps. 
• If you and your Ex are unable to agree on a list price for the property, then you can ask the real estate agent to make a recommendation as to what price the property should be listed for and what is the market value for the property.  If you are still unable to agree, then you could consider obtaining an independent valuation of the property and utilising the valuation price as the list price. 
• If you and your Ex are unable to agree on the division of the sale proceeds of the property prior to the settlement of the contract, then ask your real estate agent or conveyancing lawyer if they will keep the sale proceeds within their Trust Account until such time that you and your Ex have agreed on the division.  This will protect the sale proceeds from being depleted until an agreement is reached.

Despite us providing details above on some options and considerations when it comes to dealing with your family home, there is no one size fits all approach, and there may be other issues relevant to your specific matter.  If you reach any roadblocks when having these discussions with your Ex, then we recommend that you contact a family lawyer to assist you in thinking through these issues or having the discussion on your behalf to move you forward. 

We are happy to have a chat with you if you have any queries in relation to the sale or transfer of your property in your family law matter. 

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***Disclaimer***

This article is for general information purposes only and does not constitute legal advice or any other professional advice.