Transferring Property After Divorce
Often we will be approached by a client who was separated or divorced from their partner and is wanting to transfer their interest in the matrimonial home to the other.
What appears on the surface to be a simple transaction can have grave consequnces.
A mistake people often make is that they will sign over their interest in the property to their spouse but do not notify nor get their mortgagee’s consent to the transfer. Every mortgage contains a provision buried deep within their mortgage document that the borrower cannot sell, transfer or assign their interest in the property without first obtaining the bank’s consent. Now you’re in breach of your mortgage.
Another problem is clients will transfer their interest in the property but forget about addressing the mortgage (which has been left in joint names). The spouse has then fallen into arrears on the mortgage payments, the property is then seized by the bank and the property sold and the client is pursued by the bank for the shortfall. The bank is not interested in nor is it bound by any agreement the parties have made as to who was responsible for payments of the mortgage. As far as the bank is concerned, they have an agreement with two people and they can pursue them “jointly and severally” which means that they can sue both borrowers even though only one person is on the title.
Simultaneously with transferring your interest to your ex, the loan should be refinanced into that persons name only, thus relieving you of the debt.
The other point to consider is that whilst the loan remains in joint names it will be taken into account in your credit rating and history, so if your ex is late in payments or defaults it will impact on you and may make it extremely difficult for you to obtain another loan.
Also, in the absence of a Court or Consent Order, the transfer of the interest will attract stamp duty.
All the above problems can be avoided by preparing what we call Consent Orders.
The benefit of Consent Orders is that they can address all matters between the parties concerning property and children. It brings certainty and finality to the arrangements between the parties with no chance of one party later coming back and having a “second bite” of the cherry by demanding additional money.
The benefit of getting a Consent Order is twofold:
- you effect the transfer of interest in the property (which was the original intent) without having to pay stamp duty; and
- You get the benefit of having a Property Order in place with your ex which protects you from future claims / disagreements.
The takeaway from all this is that you should seek legal advice before signing over your share in a property and you need to make sure that it is done correctly so that any of the above issues do not come back to bite you.
Before you sign a purchase contract, we suggest you contact one of our property lawyers to discuss any potential duty concessions that may apply to you. We can be contacted on 07 3808 7777 or firstname.lastname@example.org.