Sell the house? Keep the house? How to handle a divorce

Sell the house? Keep the house? How to handle a divorce

Can you divorce without selling the house? Can I force my spouse to sell the house if we get divorced, or can my spouse force me to sell, even if we don’t want to? Your house isn’t just bricks, mortar, weatherboard or steel; deep emotional connections often exist between a house and its owners which can complicate and strain the separation process. Here we outline some of the legal ramifications of divorce as they relate to your house, with some advice on how to handle your split to ensure the best possible outcome for you and your spouse as you go your separate ways into the future.

 

COMMONLY ASKED QUESTIONS ABOUT SELLING THE HOUSE & DIVORCE

 

Can I divorce without selling the house?

While it may be possible to divorce without selling the house, the principle of relationship law requires both parties to be in agreement with the decision. So, if agreement can’t be reached, the Family Court may be needed to make decisions for you. Because the family house is a significant asset, and because a separation usually involves two people choosing to live apart, the retention of the family home is likely to cause one party (the one remaining in the house) significant advantage over the other (the one who moves out) who may then be disadvantaged without a cash settlement to establish another residence.

So whether you can divorce without selling the house very much comes down to you and your spouse or partner, your circumstances, and what you can agree to between yourselves. If either you or your spouse is in a position to set up in a new home, if there is agreement between you about one party remaining in the family home (perhaps in terms of caring for children), if you both agree to delay the sale of the home and you put this agreement in writing and take independent legal advice, holding on to your house despite a divorce may be possible for you. If your separation goes to Family Court, however, it’s likely the court will direct the property to be sold and all your relationship assets divided.

 

Can my husband/ wife/ spouse or partner force me to sell the house in a divorce?

Not exactly, no. A spouse can’t force you to do anything you don’t consent to, but if you can’t reach agreement between yourselves, then the Family Court will become involved. A court order may direct your relationship property to be divided as it sees fit, so it’s worth noting this usually entails a divesting of assets (selling up) and an equitable sharing of those assets. In layman’s terms, a cash settlement between parties is the easy solution because it’s not practical to split a physical asset like a house and share it among the two parties.

 

Are we allowed to make the decision whether or not to sell the house ourselves, if we decide to separate or divorce?

Yes, you can. In fact, experts advise this is the best way forward, if you can manage it. Why? Family Court can be a very slow process. It can take 12 months or more just to get your case heard, and if there are complications that need sorting out, the process will drag on even further. Legal fees and court costs are also expensive; unless you can get an exemption on the grounds of being a beneficiary or experiencing financial hardship, you’ll need to pay a $700 application fee to have your case lodged, and an additional $906 for each day or part-day (up to 3 hours) for the time you’re at court, and that’s before you both pay your lawyers’ fees.

 

Can I buy my spouse out of the house if we divorce? Or can they buy my share of the relationship property from me?

Yes, absolutely. You are at liberty to make your own arrangements between yourselves. One might acquire the other’s share of equity in the house (equity being the value of the house minus any mortgages) by buying outright, refinancing or swapping other relationship property assets. To protect yourselves legally, you should put all agreements in writing, and seek independent legal advice around the arrangements to ensure you don’t miss anything or risk being in a vulnerable position down the track.

 

Shall we sell the house before or after divorce?

Usually, selling the house before the divorce will put you in a better financial position. It can also be advantageous to sell the house before beginning divorce proceedings in terms of reducing the legal and other associated costs of your divorce. The tidier your assets are, the quicker and simpler your divorce process will be.

 

What if one spouse/partner wants to sublet or AirBnB part or all of the house when the other moves out upon separation or divorce?

If you own the property together and no legal settlement has been reached, the party not living in the house is entitled to be paid occupational rent payments from the other, as their share of any income made while they still own a share of the house. This works as compensation for the resident party leveraging the capital value of the home. Again, it’s best to reach agreement on the details like the amount of rent payable and when it should be paid between yourselves, or negotiated through your lawyers, rather than involving the Family Court.

 

THINGS TO CONSIDER ABOUT SELLING THE HOUSE IF YOU PLAN TO DIVORCE

  • Cashing up the house quickly could put you in a better financial position, giving you a financial boost to plan for a new future. The longer you wait, the more legal costs you’re likely to pay.
  • It can be advantageous for both parties to move out and make a clean break. Resentment can build up if one party moves on and the other stays in the house during a divorce.
  • Selling the house may help you cut ties to your ex, which could be healthier in the longer term rather than holding on to the asset.
  • Considerations around selling the house if you divorce could potentially delay an already-slow process. The more you can work out your arrangements with each other, the quicker you can get on with your future.
  • It’s possible to keep the house if that seems the best move. Keeping the house will come down to the arrangement between you and your spouse, but may include you buying them out or negotiating to sell at a later date; for example if you have children who you both feel will cope better by remaining in the family home, you may negotiate to sell the house on completion of their schooling.

 

Divorce-legal-house-home

THE LEGAL STUFF

 

Divorcing and selling your house, or splitting up your assets

There are three legal ways to separate relationship property in New Zealand.

  1. You can reach agreement between yourselves on how to share your property, and courts need not be involved.
  2. If it’s not possible to reach an agreement privately, the Family Court can determine the value of the property and how it will be divided between you and your partner; this is called a Relationship Property Order.
  3. If you have children together and there is Family Dispute Resolution mediation at play to determine a plan for the children, the division of property may be discussed during this process.

 

Note: Should it come to court proceedings down the track, it’s advised you write up any private agreements and make sure you both take independent legal advice. You should never use the same lawyer as each other in a separation/ divorce scenario.

 

Divorce and selling the house: does your relationship count?

Marriages and civil unions are covered by the Property (Relationships) Act from the date the of the marriage or civil union. Whether the marriage or civil union has lasted for less than or more than three years can make a difference to how property is divided. In relationships that have lasted longer than three years, assets including the house are generally shared equally, but less than three years may mean a division according to which partner has contributed more to the asset pool. 

De facto relationships (when a couple have neither married nor had a civil union) are generally not covered if they are less than three years old, however, there are possible provisions in the Property (Relationships) Act for partnerships longer than three years. The Family Court may examine a range of factors to determine de facto relationship status, such as length of relationship, the extent to which a couple have shared a home, whether the relationship was sexual, the extent of dependence on each other in terms of financial arrangements, the ownership and use of the property, extent of commitment to a shared life, or care and support of children.

 

Divorce is about more than just selling the house itself 

Relationship property includes the shared family home and contents (excluding family taonga or heirlooms). It may also include other land, building or vehicles, income earned during the term of the relationship (including superannuation, insurance payouts and rents from any joint property), property acquired during the relationship and intended for you both to use (like a bach or second home), and non-personal debts. Also included are gifts and inheritances that have become mixed with relationship property, any property you both agree is relationship property and any increases in the value of, or income or proceeds from relationship property.

 

The principles of relationship property law

  • All parties have equal status.
  • All forms of contribution to the relationship are viewed as equal (eg contribution in the form of childcare is seen as equal to monetary contribution via wages or salaries).
  • Fair distribution of relationship property takes into account any economic advantages or disadvantages arising for either party as a result of the relationship ending.
  • Relationship property issues should be resolved as inexpensively, simply and quickly as possible while still being consistent with justice.

Divorce-home-broken-heart

If you can, it’s always preferable to try to reach your own agreement with your spouse or partner, with minimum involvement from your legal representatives. This will be the least expensive, quickest and easiest way to divorce and separate your assets, including selling your house. While separation is naturally painful for both parties, the more the two of you can compromise and work out mutually beneficial arrangements, the quicker you’ll be able to get on with your lives.

 

Categories

Subscribe to the Newsletter

Subscribe to MyPitchList blog newsletter to learn step-by-step how to be a successful seller or buyer.

MyPitchList logo

100% Privacy. No spam guaranteed