A question that is often asked by people looking at taking the next step in a relationship and moving in together is whether allowing a person to move into their property will give them an automatic entitlement to half of the house in the event of separation. Like any good family law question the answer is “it depends”….
Here are some examples of when a person might be able to claim half or a portion of the equity in the house that was owned in one party’s name at the start of a relationship:
- Where there was little or no equity in the property at the start of the relationship and over the course of the relationship the equity increases either by virtue of direct financial contributions (eg mortgage repayments which are in a lump sum or periodic or renovations);
- Where there has been significant market growth in the property during the course of the relationship and contributions have been made by the non owner during the course of the relationship;
- Where the parties change the legal ownership of the property or refinance the mortgage into joint names during the course of the relationship;
- Where the parties have children together such that one of the parties financial position is changed by children entering into the relationship;
Can this claim be prevented? And if so how?
Some hints and tips to assist you in the event of a potential claim are as follows:
- Do not change the legal ownership of the property;
- Keep your bank accounts, mortgage repayments and property related expenses separate and paid by the legal owner of the property;
- Keep clear evidence of any direct financial contributions to the property;
- Don’t intermingle your finances by combining and joining all of your bank accounts and other assets – keep some of your assets separate;
- Have a conversation about how you want and expect to manage your finances with your partner early, before co-habitation if possible. If you can’t have a conversation and resolve this issue before you live together then this should be a “red flag” for potential issues down the track when you separate.
The above suggestions are not a sure fire way to protect your assets but at minimum they will help if a claim is made.
If you are concerned about a potential claim by your partner/ex-partner/spouse against your property in the event of separation it is important that you seek legal advice. This advice can be obtained even before you start living together or co-habiting. In some circumstances a “pre-nuptial or co-habitation financial agreement” can be entered into to prevent future claims. You should discuss whether this option is right for your relationship with an experienced lawyer.