If you are going through a separation, there are several things you need to consider prior to selling the family home.
Do we need to sell?
It is important to note that selling is not the only option when it comes to dealing with the family home at the end of a marriage or de facto relationship. While you will need to address the division of assets between you and your former spouse (or partner), it is possible for one of you to retain the family home. Of course, this means that one party may need to buy the other party out of their share of the property. As a result, one party may take over full responsibility for the mortgage repayments. This may also involve refinancing the existing loan with the bank.
The issue of whether the family home needs to be sold will depend on whether you and your former spouse (or partner) are able to reach agreement on the division of your assets. If there are multiple properties involved in your property settlement, you may decide to negotiate over who retains which property. For specific information regarding how to divide your property when separating, you may wish to read this article on our website.
When to sell?
It is not necessary to commence arrangements for the sale of the family home immediately after separation. The issue of when to sell the family home may depend on several factors, including (but not limited to):
- The financial circumstances of you and your former spouse (or partner);
- The state of the property market; and
- If there are children involved.
If there are children involved, you should consider what impact the sale of the family home may have upon your children. For example, one of your children might be approaching a milestone year, such as their first or last year of secondary school. It may not be appropriate for that child to experience the stress of this milestone event alongside the breakdown of their parents’ relationship and subsequent sale of the family home they grew up in. This may cause unnecessary disruptions in an already challenging period for children.
Which agent to choose?
It is in the best interests of both you and your former spouse (or partner) to maximise the return on the sale of the family home. As such, it is important to adopt a cooperative approach when choosing to sell the family home following separation or the breakdown of a marriage.
If you are not able to reach an agreement on which real estate agent to use, it may be worth suggesting three agents to your former spouse (or partner) and allowing them to make the decision on which of the three agents will handle the sale. This is often a productive method in reaching common ground on a process which should be mutually beneficial.
What happens to the sale proceeds?
If you and your former partner have retained legal representation, the proceeds from the sale of the family home will usually be held in one of the acting law firms’ trust accounts. The funds will remain in this trust account pending resolution of your matter. It is important to note that funds held in a law firm’s trust account do not accrue interest, unless the funds are specifically invested.
Can I access funds from the sale of my family home prior to the completion of my property settlement?
In the event that you require an early advancement of funds from the sale proceeds of your family home, it is possible to arrange for an early distribution. However, both parties must consent to any funds being withdrawn from the trust account holding the sale proceeds. This is known as a ‘partial distribution’ or a ‘partial property settlement’. Partial distributions will be taken into consideration when reaching a final agreement on your property settlement.
Will there be tax payable on the sale of the family home?
Capital Gains Tax (CGT) is, generally, not payable on the sale of the family home (after separation), provided it was the principal place of residence throughout the relationship. By contrast, investment properties will usually attract CGT upon sale or a transfer, but the Family Law Act provides some roll over relief. It is important to seek advice from a qualified tax accountant regarding any taxation issues affecting your family law property settlement.
Who is on the title for the property?
You should also clarify who is registered on the title for your property, and the way your property is being held. There may be different implications concerning whether your property is being held jointly or as tenants in common. Obtaining a title search of your property will reveal who is registered as proprietors on the certificate of title for your family home (and the way in which the property is held). We are able to assist you with this process.
What if I’m not registered on the title?
If you are not registered on the title for the family home, your former spouse (or partner) can make decisions relating to the sale of the property without your consent.
To protect your interest in the family home, you should consider lodging a caveat on the title of the property. This will ensure that your former spouse (or partner) is prevented from selling, transferring, or dealing with the property in any other way, until your caveat has been removed.
Please contact Charlie Robinson of our office (03 9435 9044) if you have any questions concerning this.
This is general information only. Please contact us for expert legal advice that takes your unique personal situation into account prior to making any decisions based on this article.
