Can I Keep the Family Home After Divorce? Understanding Your Property Rights
For most Australians, the family home is not just a significant financial asset but also a place of emotional value. It’s also a single asset, so one of the most common questions in the event of a separation or divorce is what happens to it, and how could it possibly be “split” between both parties fairly?
The answer depends on a range of factors, including the asset pool available for distribution, borrowing capacity and your specific circumstances.
Understanding Property Settlement in Australia
In Australia, property settlement following a divorce is governed by the Family Law Act 1975. The legislation provides a framework for dividing assets and liabilities between separating parties, with the goal of reaching a fair and equitable outcome. The term "property" includes all assets owned by the parties, such as family home, but also any investment properties, bank accounts, stock, vehicles, superannuation, and personal belongings.
The family home is typically one of the most significant assets in a property settlement. Its future ownership depends on several considerations, including the financial and non-financial contributions of each party and their future needs
Steps in Determining Property Settlement
The Family Court follows a structured process to decide how property should be divided. This process applies to married couples and de facto relationships (including same-sex couples), provided certain conditions are met. The steps are as follows:
Identifying and Valuing the Property Pool
The first step involves listing all assets and liabilities of both parties, including the family home, mortgages, superannuation, debts, and any other property. The current market value of the family home will be considered, as well as any outstanding loans secured against it.Assessing Contributions
The Court evaluates both financial contributions (e.g., income, savings, and payments towards the mortgage) and non-financial contributions (e.g., homemaking and child-rearing). For instance, if one spouse stayed home to care for children while the other worked, the Court recognises the non-financial contributions as equally important.Considering Future Needs
Future needs are an essential consideration. The Court takes into account factors such as the care of young children, earning capacity, age, health, and financial resources of each party.Ensuring a Just and Equitable Outcome
Finally, the Court ensures that the proposed division of assets is fair and reasonable in all the circumstances. This overarching principle considers the unique dynamics of each case.
Can You Keep the Family Home?
Whether you can keep the family home depends on several factors. Here are the key considerations:
Financial Feasibility
Retaining the family home usually involves either buying out the other party’s share or offsetting their entitlement with other assets (e.g., superannuation or investments). If you don’t have the financial capacity to do so or cannot secure a loan to refinance the mortgage in your sole name, retaining the home may not be feasible.Children’s Best Interests
If children are involved, the Court often prioritises their welfare. Retaining the family home can provide continuity and minimise disruption to their lives. If you are the primary caregiver, this consideration may work in your favour.Emotional and Practical Factors
While emotional attachment to the home is understandable, it’s essential to weigh the practicalities. Consider whether the costs of maintaining the home align with your post-divorce financial circumstances. Downsizing or selling the property may offer a more sustainable solution.Agreement Between Parties
If you and your ex-partner can reach an amicable agreement, retaining the family home may be more straightforward. Negotiation or mediation can help both parties find a mutually acceptable solution, potentially avoiding the need for Court intervention.
What Are Your Options?
Depending on your circumstances, you may consider the following options regarding the family home:
Selling the Home: Proceeds from the sale are divided according to the agreed or Court-ordered settlement. This option allows both parties to start fresh financially.
Buying Out the Other Party: If you wish to keep the home, you may negotiate to buy out your ex-partner’s share. This requires financial capacity and potentially refinancing the mortgage. If you are considering this option, you should make enquiries with a mortgage broker or a financial advisor as to your borrowing capacity.
Co-Ownership: In some cases, parties agree to retain joint ownership temporarily, such as until the children reach a certain age, after which the property is sold.
Formalising any agreements reached
In Australia, property transfers between separating spouses or de facto partners as part of a formal property settlement are exempt from transfer duty (formerly known as stamp duty). Generally, to qualify, any agreement reached for one party to retain the family home, must be documented through Consent Orders or a Binding Financial Agreement to receive the exemption. This not only ensures legal certainty and protection for both parties but also provides substantial cost savings.
Seeking Legal Advice
Given the complexities of property settlements, seeking expert legal advice is crucial. A family lawyer can help you understand your rights, negotiate with your ex-partner, and represent your interests in Court if necessary. They can also guide you through alternative dispute resolution methods, such as mediation or collaborative law, which are often faster and less costly than litigation.
It’s important to work with the best Campbelltown divorce lawyer – or a lawyer local to you if you live outside of Campbelltown. The right family lawyer will understand your unique challenges and can also assist you with drafting the necessary property settlement documents to ensure that any agreements reached are binding and that the party seeking to retain the family home can benefit from stamp duty exemption.
