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For many couples, the last thing that comes to mind when setting up home together is what will happen if it all goes wrong. The excitement and promise of the future means that many people never think about the consequences of separation. Whilst this is a perfectly natural, human reaction, living together without thinking about ownership of property can create problems down the line if property does need to be divided.
What rights do married couples have?
People who choose to get married enjoy a significant degree of protection regarding their property rights. It is pertinent to mention that Australia has also acquired the common law approach from UK relating to the family-laws which is basically non-interventionist, at least where the marriage remains intact.
A feature of Australian law is that marriage has no legal impact on a spouse's ownership of property. Anything owned before marriage or acquired in any manner during it remains the property of the owner and is under his or her management and control while the marriage continues.
However, in the case of separation a determination is sought for division of the assets and to do so all assets and liabilities are considered, regardless of their legal title. Where some assets are owned jointly (such as matrimonial homes) the spouses have equal rights and entitlements to them; but this may also be modified in matrimonial proceedings. There are certain factors are taken into account before deciding whether the assets can be considered a) to be divisible, and b) in what proportions the division may occur. These factors may be such as how and when the assets were acquired and the uses to which they were put during the marriage.
The Family Court in Australia has a four-step process when reaching this decision:
- Identifying and valuing the assets and liabilities of the parties
- Assessing both the financial and non-financial contributions made by each of the spouse and on that basis decide what percentage of the property each spouse should receive
- Assessing the future needs of each person and making any further adjustments that may be necessary in ensuring a fair settlement
- Lastly, determining whether the resulting division is just and equitable
The myth of the common law spouse
It is a common myth that couples that live together for a long period of time have the same rights as married partners. A survey in 2004 revealed that 61% of unmarried cohabitees believed they were effectively married in the eyes of property law. This is despite the reality being very different.
Couples who are unmarried have no automatic entitlement to financial support from each other when they separate. Nor can they register home rights to prevent their partner from selling the house without having an interest in the property in their own right. The fact of their long-term cohabitation is irrelevant. These couples would have to rely on complicated largely unspecific state property laws which could also vary state from state.
To assert any kind of rights in law unmarried partners must turn to the complex, technical law of trusts. It is to this area, rather than the more personal, user-friendly family law context, that claimants must go to obtain protection when the relationship comes to an end.
Who owns what?
The law of trusts offers protection to cohabitees by seeking to protect the intention of the parties when financial arrangements were made. If cohabiting couples expressly state how they wish the beneficial interests in their property to be divided, this will always be binding. Therefore, couples can simply and effectively control what happens in the event of separation by recording their wishes in writing at any time in a separation agreement.
Whenever property is purchased solicitors and agents will try to ensure that unmarried partners address this issue.
As referred to before, however, the last thing new cohabitants want to do is lay down rules about who owns what when they first move in. The plain fact is that the vast majority of unmarried cohabitees fail to mention beneficial interests and the result is uncertainty when one partner moves out.
Where there is no express declaration concerning beneficial interests, the courts will try to infer what intentions the parties had. This exercise is different depending on whether the property is registered in joint names or one partner’s sole name.
Where the parties purchase a house in joint names, the law presumes that they intended to hold the property equally. This means that a court will start from the view that each partner is to be awarded 50% of the value of the property in the event of separation.
This is, however, just a presumption. It is open to the parties to rebut this presumption by producing evidence that the parties actually intended unequal division. Such evidence could include:
- advice or discussions at the time of transfer
- reasons why the property was jointly acquired (for example, as an investment as well as a home)
- purpose of the home (for example, whether it was also used as business premises)
- nature of the parties’ relationship
- arrangement of finances
- arrangement of outgoings
In cases where the parties keep their finances rigidly separate, for example, the courts are likely to find that they intended their interests to reflect how much money they had each contributed to the property. This would be different to situations where couples share money and have much closer financial dealings, in which case a court would be more likely to find that they intended the property to be split evenly. Unmarried couples should keep separate bank accounts, and contribute to a joint account from which the bills and expenses are paid.
Where property is registered in the name of only one partner, the presumption is reversed. In these cases it is presumed that the partner who registered the property owns 100% of its value. The burden is then on the other cohabitee to show that they intended to hold the property equally or in different terms.
This can be unfair on partners who choose to move into each other’s houses without giving any thought to ownership. In these cases a person can make a considerable contribution to the relationship (and the mortgage through informal 'rent' payments) and still have to prove that he or she should be entitled to a small share of the property.
Once again, the most sensible course of action in these situations is for couples to expressly state what they would like their rights to be. Our document co-ownership agreement: tenants in common achieves this.