Splitting up, who gets the equity

[plucka99]

I have a friend who purchased a house with her boyfriend only a few months ago. They share the title/deed and mortgage 50/50. Things have not worked out and they want to split. Now they have only been living together for these few months so I assume they are not considered defacto.

The complication is that in the purchase she contributed a sizeable deposit while he provided none (he was awaiting the sale of his own property to inject these funds but failed to sell his house).

Considering they are not defacto but both have joint ownership her worry is that he might try to claim 50% of the equity in the house. Being that the purchase was only a few months ago there would be little to no capital gain (or even negative) plus only very minimal equity supplied via mortgage repayments, thus the only equity in the house is the deposit which she paid. Does he have a right to claim half of this deposit equity or not? Ideally she wants to take over the ownership and mortgage by herself and let him walk away. A forced sale would result in both of them losing money through RE fees, huge mortgage early repayment fees etc

 

[Luv2Travel]

I can't believe he'd be wanting to take his house plus half the house she paid for.

I'm sure someone in the legal profession can give you a better legal response, but:

Usually, you will need to demonstrate that you have lived together for at least two years. This is overlooked if there is a child of the relationship, or in other exceptional circumstances. Other criteria that can determine de facto status include:

length of relationship
co-habitation
distribution of household duties
financial interdependence
joint assets
the care and control of any children of the relationship;
whether friends and relatives see you as "de facto";
whether you intend the relationship to be permanent.
De facto status is not achieved through any formal ceremony, but automatically applies when two people meet the criteria. Unlike marriage, de facto status is not entirely portable. Whilst it is recognised in most states of Australia (except South Australia), Canada and New Zealand, it is not recognised the USA and many other countries.

Looks to me, she might pass some of those tests (particularly the joint assets one). If he doesn't want to play fair, I'd be threatening him with the fact they were de-facto, and she can therefore go half his assets?

 

[plucka99]

I can't believe he'd be wanting to take his house plus half the house she paid for.

I'm sure someone in the legal profession can give you a better legal response, but:



Looks to me, she might pass some of those tests (particularly the joint assets one). If he doesn't want to play fair, I'd be threatening him with the fact they were de-facto, and she can therefore go half his assets?

The guy hasn't said he actually wants to claim it, more than likely he won't but she just wants to rule out the possibility. In my mind not being defacto then everything she owned before they met (including the deposit) he has no claim on but just not sure how that works considering the house is jointly owned. I honestly can't see how they could be considered defacto, living together for only 3-4 months, no children together, even their finances and banking etc are separate.

 

[jrc77]

I honestly can't see how they could be considered defacto, living together for only 3-4 months, no children together, even their finances and banking etc are separate.

Plucka,

As an aside, for the definition of "defacto" in regard to the First Home Ownders Grant in NSW you are defacto as soon "as the bags hit the floor" (quoted from the rep I spoke to when I rang and questioned OSR) when you move in together. How stupid is that?

I suspect this definition of defacto doesn't apply for splitting of assets etc.

Regards,

Jason

 

[Piston Broke]

If he doesn't want to play fair, I'd be threatening him with the fact they were de-facto, and she can therefore go half his assets?

I doubt there's a defacto relationship.
That type of bitchiness will just **** him off, and so it should.
The relationship is that of 50/50 ownership and hope that his mindset is not the "take wateva you can get" Biggles seems to have.
And given that he did'nt put up any deposit, he's not likely to have much anyway.

Getting down to the facts, there's not much info here to work with just as much equity in a place bought a few mths ago with a most probly small deposit.
But to change the title may require some expenses which more than likely she'd have to pay to get him off the title deed, as he'd have no reason to put up the $$.

 

[Luv2Travel]

The relationship is that of 50/50 ownership and hope that his mindset is not the "take wateva you can get" Biggles seems to have.

I'm not suggesting that at all. I think they should both walk away with what they put in i.e. this house is hers if she paid the deposit and he hasn't contributed and he keeps his house. I said if he wants to get nasty and not play fair, then she should play his game back at him to hopefully scare him into doing the right thing. But I'm female, so of course I'd just rip him off and leave the "poor guy" with nothing.

 

[Perp]

As an aside, for the definition of "defacto" in regard to the First Home Ownders Grant in NSW you are defacto as soon "as the bags hit the floor" (quoted from the rep I spoke to when I rang and questioned OSR) when you move in together. How stupid is that?

Easy; don't live together or buy significant assets together until you're in a committed relationship.

 

[cadence]

plucka do you know how much money is involved here? ie: how much was the deposit she contributed.

If it's not insignificant (say >$40k), I would recommend your friend obtain legal advice. She should be able to get away with a free first-time consultation with a property lawyer (probably won't last more than 15minutes though). The situation doesnt sound too complicated, and a good property lawyer would be able to tell her what her chances are in terms of protecting the money and whether it is worthwhile for her to pursue it taking into account the cost of legal fees.

There is a branch of law called 'equity' (its meaning closer to equality and justice than what we use the term for in property). It supplements strict rules of law where their application would operate harshly. There are some old cases which dealt with the situation of where a property is joinly owned by a couple, but say wife contributes more towards the mortgage repayments over the years than the husband. On separation and selling of the property, a strict application of the law means that they get 50% each as the property is joinly owned. But judges recognised that would have been unfair to the wife who contributed more money throughout the course of the marriage, so they found that the wife should be entitled to get a bigger share. The thing is with the judges have a discretion as to whether they would apply the laws of equity, so it's not a hard line. Property lawyers or anyone with experience in this please chime in - there may be new caselaw or legislations which override everything I have said.

In short, my suggestion would be for her to go see a good property lawyer (a short free consult should suffice as the facts are not complicated).

Good luck to your friend. It's a very unfortunate situation =( ... any chance they would make up and live happily after in that house?

 

[cadence]

reminds me of what my superior told us grads in my first job out of uni - PROTECT YOUR ASSETS

he was a very successful person but had lost more than half of what he earned in a divorce settlement .... he said the biggest regret was not to have protected himself he recommends pre-nups for married people ... and never mix your money if you are in a fresh relationship .........

I agree that's more of an extreme opinion .........

 

[plucka99]

plucka do you know how much money is involved here? ie: how much was the deposit she contributed.

If it's not insignificant (say >$40k), I would recommend your friend obtain legal advice. She should be able to get away with a free first-time consultation with a property lawyer (probably won't last more than 15minutes though). The situation doesnt sound too complicated, and a good property lawyer would be able to tell her what her chances are in terms of protecting the money and whether it is worthwhile for her to pursue it taking into account the cost of legal fees.

There is a branch of law called 'equity' (its meaning closer to equality and justice than what we use the term for in property). It supplements strict rules of law where their application would operate harshly. There are some old cases which dealt with the situation of where a property is joinly owned by a couple, but say wife contributes more towards the mortgage repayments over the years than the husband. On separation and selling of the property, a strict application of the law means that they get 50% each as the property is joinly owned. But judges recognised that would have been unfair to the wife who contributed more money throughout the course of the marriage, so they found that the wife should be entitled to get a bigger share. The thing is with the judges have a discretion as to whether they would apply the laws of equity, so it's not a hard line. Property lawyers or anyone with experience in this please chime in - there may be new caselaw or legislations which override everything I have said.

In short, my suggestion would be for her to go see a good property lawyer (a short free consult should suffice as the facts are not complicated).

Good luck to your friend. It's a very unfortunate situation =( ... any chance they would make up and live happily after in that house?

The amount in question is not small ($150K) which is basically her life savings. I too advise her to seek a lawyer for advise however the last thing she wants is a legal battle and end up losing half the money to lawyers. Hopefully this guy will do the right thing and walk away but it would be comforting for her to know exactly what the law is. I could be wrong but unfortunatley I'm getting the impression it's not a simple straight forward answer and could be up to legal interpretation.

Obviously in hindsight she made a mistake and should have protected her assets but that can't be changed now so such comments don't provide anything constructive.

Thanks for the replies.

 

[plucka99]

Plucka,

As an aside, for the definition of "defacto" in regard to the First Home Ownders Grant in NSW you are defacto as soon "as the bags hit the floor" (quoted from the rep I spoke to when I rang and questioned OSR) when you move in together. How stupid is that?

I suspect this definition of defacto doesn't apply for splitting of assets etc.

Regards,

Jason

Yes I've noticed that as well, seems the legal definition in regards to asset splitting is generally at least 2 years living together but on the other hand government agencies like centrelink consider you defacto the day you move in together. It's a joke, seems like they want to make the definition suit them the best and screw the person over

 

[wylie]

Caxton Legal Centre Inc. 28 Heal Street, New Farm QLD 4005. Tel: (07) 3254 1811. Fax: (07) 3254 1356. Email: [email protected] ...

Tell her to go and have a free visit at New Farm at the above legal centre.

At least it would put her mind to rest.

If she does visit (I assume she is in Brisbane) tell her as soon as she turns into the street, it is the first house on the left, right next door to the little set of shops. It is easy to miss in the dark.

 

[plucka99]

I doubt there's a defacto relationship.
That type of bitchiness will just **** him off, and so it should.
The relationship is that of 50/50 ownership and hope that his mindset is not the "take wateva you can get" Biggles seems to have.
And given that he did'nt put up any deposit, he's not likely to have much anyway.

Getting down to the facts, there's not much info here to work with just as much equity in a place bought a few mths ago with a most probly small deposit.
But to change the title may require some expenses which more than likely she'd have to pay to get him off the title deed, as he'd have no reason to put up the $$.

Yes she will up for 50% stamp duty to transfer the title to her, but that is peanuts compared to her deposit involved.

 

[Terryw]

Its best to look directly at the legislation.

The Family Law Act 1975, defines defacto under s4AA
see http://www.austlii.edu.au/au/legis/cth/consol_act/fla1975114/s4aa.html
It says nothing about being in a relationship for 2 years - the laws have changed recently.

This couple could fall under the definition of defacto.

Then go to PART VIIIAB--FINANCIAL MATTERS RELATING TO DE FACTO RELATIONSHIPS.
see esp s90SM regarding the Alteration of property interests
http://www.austlii.edu.au/au/legis/cth/consol_act/fla1975114/s90sm.html

 

[plucka99]

Its best to look directly at the legislation.

The Family Law Act 1975, defines defacto under s4AA
see http://www.austlii.edu.au/au/legis/cth/consol_act/fla1975114/s4aa.html
It says nothing about being in a relationship for 2 years - the laws have changed recently.

This couple could fall under the definition of defacto.

Then go to PART VIIIAB--FINANCIAL MATTERS RELATING TO DE FACTO RELATIONSHIPS.
see esp s90SM regarding the Alteration of property interests
http://www.austlii.edu.au/au/legis/cth/consol_act/fla1975114/s90sm.html

Thanks for the link, basically it's saying there are a number of factors to take into account, still given the short length of the relationship I find it hard to imagine a judge would rule it defacto. If however it was the case then as Biggs said then she would be entitled to half of his other house if he wanted to claim her deposit so he would have no advantage in going the defacto route.

 

[Terryw]

Just because they are classed as defacto does not automatically means she is entitled to 50%. When looking at property settlements the courts take into account a range of factors the main ones being contributions to the property. This can include non financial contributions. If one partner hasn't contributed, then they won't be entitled to much if anything.

 

[cu@thetop]

If n de facto maybe an implied partnership?

 

[Nathan]

Prenup's, trusts, and non trading companies. Very very important. People dont plan on having an accident but still take insurance. Whats different?

 

[ozmale42]

Yes she will up for 50% stamp duty to transfer the title to her, but that is peanuts compared to her deposit involved.

No stamp duty if assets divided in accordance with Consent orders lodged with the court . Just been there and my ex paid nothing to get my share transferred to her.

Basically if it is deemed de facto same rules apply as per married couple.

Because no kids a 50/50 split most likely outcome adjusted for whatever each partner contributed. The contribution has less relevance the longer the relationship lasted.

 

[Piston Broke]

You need to look at the property relationships act and Family law act
http://www.austlii.edu.au/au/legis/nsw/consol_act/pa1984298/

http://www.austlii.edu.au/au/legis/cth/consol_act/fla1975114/

and
http://www.law4u.com.au/cgi-bin/factsheet_right.asp?article_id=476

(2) In determining whether two persons are in a de facto relationship, all the circumstances of the relationship are to be taken into account, including such of the following matters as may be relevant in a particular case:

(a) the duration of the relationship,

(b) the nature and extent of common residence,

(c) whether or not a sexual relationship exists,

(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties,

(e) the ownership, use and acquisition of property,

(f) the degree of mutual commitment to a shared life,

(g) the care and support of children,

(h) the performance of household duties,

(i) the reputation and public aspects of the relationship.

(3) No finding in respect of any of the matters mentioned in subsection (2) (a)-(i), or in respect of any combination of them, is to be regarded as necessary for the existence of a de facto relationship, and a court determining whether such a relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.