How to divide property in the event of Separation
One problem that arises when a relationship breaks down is the division of property that has been accumulated while you were together.
Property could have been acquired in a variety of ways for example:
- you pay for the property equally, and it is registered in only one name;
- one of you pays for the property, and it is registered in both your names;
- one of you pays for the property, and it is registered in the name of the other;
- a deposit is paid by one of you, and the mortgage is paid by the other;
- one of you pays for the property, and the other promises to pay back half the purchase price later; or
- one of you pays for the property, and the other maintains the property and does household duties.
As you can imagine, these are only a few of the scenarios that are faced by de facto partners when they separate. This gives you an idea why these situations can be so complicated.
What types of property?
The law applies to all types of property, whether it is just in your name or in both names. It includes inheritances and gifts, and property owned by one of you before the relationship began.
What law applies?
If you are married, the Family Law Act is used to decide how to divide your property. Unfortunately, this law does not apply to property division in de facto relationships. The law that does apply in most situations is the Property (Relationships) Act.
Whether this law will apply depends on your circumstances, such as:
- the nature of your relationship with your partner;
- the date that you separated;
- how long you have lived together and where you have lived (i.e. in NSW or not);
- whether there’s a child from the relationship; and
- whether substantial financial or non-financial contributions have been made – this includes contributions to the home or taking care of children.
When should I claim?
You do not have to be separated to make a claim, but if you are, you must claim within two years after the date that your relationship ended.
The court can ignore this rule if it’s convinced that you would be caused real hardship. Remember that the other partner can say that allowing the claim after the usual period caused them hardship too. So try to get your claim into the court on time.
What will a court consider?
Courts will decide what is a “just and equitable” division of property.
They may consider the expectations of each partner, as well what is needed to provide adequate compensation for the contributions to the relationship.
Under the Property (Relationships) Act, contributions considered by the court can be:
- financial and non-financial contributions which are made directly or indirectly to the purchase, maintenance and improvement of any of the property; or
- contributions to the welfare of your partner or your family – this includes contributions as a homemaker or parent.
The courts will also consider written agreements if:
- the agreement is signed by both of you;
- you both have received independent legal advice, and the lawyer has provided a certificate (this is set out in the Act) that confirms this.
If you’ve made any type of agreement with your partner, make sure you show it to your lawyer at the first interview.
Trusts
If you don’t meet the requirements set out in the Property (Relationships) Act, you can still apply to a court for the division of your property. But the law that is used is called the common law.
The common law allows the court to look for what is called a “trust” i.e. a judge will look behind a financial transaction at the real intention of the partners to decide who will benefit from the property (and to what extent).
To prove that a trust exists, the person claiming the share in the property will usually have to show that:
- they acted to their disadvantage i.e. they gave up something like time (e.g. doing renovations without payment) or money (e.g. paying the rates and mortgage); and
- at the time of these actions, the partner must believe they were going to get an interest in the property. Sometimes a court will find that one partner is entitled to a share of the property because it would be unconscionable if this did not occur, i.e. where it would be unfair not to give the partner a share of the property, even if there was no evidence of a mutual intention to give the partner a share.
Court orders
Types of orders include:
- adjusting the property interests of one partner in favour of the other. This is similar to what a Family Court judge can do to change the property interests of married couples. The court does not have to transfer the ownership of property from one partner to another;
- deciding to give one partner a lump sum payment as compensation;
- ordering the sale of the property and distribution of the proceeds;
- ordering that the unsuccessful partner pays the other’s legal costs.
Which court?
The Local Courts and the Supreme Court can hear disputes about de facto property division.
Choosing a court will depend partly on the value of the property. Also keep in mind that you can use the Local Court if both of your agree – it’s a lot cheaper than the other courts.
The Family Court may be able to hear these disputes where there is a related issue, for example, if you have children and an issue in relation to the care of the children needs to be decided as well as property division.
It’s important to get legal advice if you’re thinking about this sort of claim – the lawyer will know what to do.
What if my partner dies?
It depends whether you have applied to the court. If you haven’t, then it will be too late to make a claim.
If you have, but the case is not finished, the court case can continue.