Good question, and one that frequently comes up in Family Law when negotiating a property settlement with the other party.
As with much of Family Law, the answer is – it depends. The law about who gets what property when a marriage or a de-facto relationship breaks down (and the law, with some exceptions, treats them the same) is not written down in a book that anyone (even lawyers) can buy. While the Family Law Act sets out the broad principles governing this area of the law, much of it is handed down by the Judges in deciding cases that go on to a Final Hearing. Thankfully, only about 4% of all cases that are issued in the Courts end up needing a decision by a Judge.
So, back to the question – “do I get to keep the house that I brought into our relationship?” Many people mistakenly think that if, for example, they owned a house, an apartment or any “real property”, as the law calls real estate, at the start of a relationship, that should be “quarantined” and taken out of what lawyers call the “asset pool” – all of the joint or individual assets owned by the parties, or either of them, at the end of the relationship.
Time – it’s largely about time. Let’s take an example. Fred and Mary started a de-facto relationship 15 years ago. Fred moved into Mary’s three bedroom house in Box Hill that was the family home of Mary and her former husband – she bought his share of the house as part of their Family Law property settlement. There was a mortgage on the house when Fred moved in - $100,000. $50,000 of that was the loan that Mary and her former husband had on the house. The other $50,000 was what Mary borrowed from the bank to buy her former husband’s share. Let’s assume, in this example, that both Fred and Mary had some superannuation, they had a car each, some furniture, small amounts in the bank, but the main asset was Mary’s house.
So, all goes well with Fred and Mary for some 15 years. They have two children of their relationship and, after the first child is born, 5 years into the relationship, they get married. Fred works full time as a lecturer at Box Hill TAFE throughout the relationship. Mary works part time at the Box Hill Library, while being the primary carer for their two children and the main homemaker.
Then, after 15 years, Fred strays from the straight and narrow and has an affair with his secretary at TAFE. Mary finds out, she ends the relationship and Fred moves out, to live with his new love in her apartment. Fred and Mary agree about the children spending time with both of them, about Mary getting some of Fred’s superannuation, they sort out the bank accounts and shares, and they each keep their cars and some furniture. But what about the house?
Mary tells her lawyer that she wants to keep the house and to not pay Fred anything for it. After all, she says, she has already bought it twice – once with her former husband and then again to buy him out – she doesn’t want to have to buy it for a third time, from Fred. So, what does the law say?
Unfortunately for Mary, 15 years is considered a “long marriage”. The law adds the time that she and Fred spent in their de-facto relationship (about 5 years) onto the period that they were married (10 years) and calls it a 15 year relationship.
Fred says that he wants a property setltement from Mary – he wants a cash payout so he can re-establish himself and she can keep the house. Why? Well, for a start, Fred worked throughout the 15 years, it was his income that mostly paid the mortgage, he and Mary brought up the children together – he’s sorry she has to “buy” the house a third time, but he wants some money to set himself up again.
And the law says? The fact that Mary brought the Box Hill house into the relationship is, after 15 years, largely irrelevant.
While the Courts would say that Mary’s child rearing, homemaking and part time work at the Box Hill Library equalled Fred’s contributions to the relationship – his full time work, his share of bringing up the children and homemaking (he loved doing the gardening – especially the weeds – what a gem!) would be treated as equal to Mary’s contributions.
Those matters, plus the fact that it was a long time ago (15 years) that Mary brought the house in, would add up to Mary not getting credit for the Box Hill property.
If the children were to be cared for into their adulthood mainly by Mary, she would receive a “loading” in a property settlement, because of her income, and her capacity to earn income while caring for the children, was significantly less then Fred’s.
In the absence of any loans from family members or inheritances, and if everyone was in good health, she would be looking at around 60% to 65% of the asset pool – so she would, from her point of view, be “buying” the house a third time.
With the benefit of hindsight (a wonderful thing, especially when looking back on what we could or should have done in life), Mary should have got Fred to enter into a Binding Financial Agreement (a BFA) before they began living together. A BFA is an Agreement, made under the Family Law Act, that has the full force and effect of a Court Order. A BFA could have said that, if they separated in the future, Fred would get an agreed settlement – which would increase the longer the relationship lasted. Family Lawyers are very good at preparing BFAs – and they are cheap insurance against a relationship ending in the future – the lawyers make less money that way, but the clients are happier.
Finally, what would have happened if Fred and Mary’s relationship ended after, say, 2 years? Fred would have received a much smaller financial settlement, because his contributions to the property – paying the mortgage, doing the gardening, helping with any children, would have been over a much shorter period, and Mary’s contributions of bringing the Box Hill house into the relationship would have assumed much greater importance.
So, do think about a BFA – which can include a pre-nuptial agreement before the marriage, before you start that loving relationship.