There are many assumptions when it comes to who gets to keep, or live in, the matrimonial home after a divorce order is granted.
But the truth is that ownership of the home will either depend on who the property is registered to, or how the couple is married.
If they are married in Community of Property (COP), Maria Davey of Meumann White Attorneys says the property will be in both partner’s names. This is even the case if the property was acquired by one partner before the COP marriage.
If, however, a couple is married out of COP, the property can either be registered in one or both names.
“The property is an asset in the joint estate if it is a marriage in COP. If they are married ANC (antenuptial contract) with accrual, it is an asset in the estate of the registered owner/s.
“I mention it being an asset because everything gets taken into account in determining the value of the joint estate (if COP) or individual estate if ANC with accrual. Who keeps the property depends on how the parties eventually settle the proprietary consequences of the divorce,” she says.
Echoing this, Eduan Milner of Eduan Milner Attorneys, Notaries and Conveyancers in Cape Town, says it is important to differentiate between a marriage in COP and a marriage out of COP, because the legal consequences differ markedly.
“If the marriage is one of community of property, the property belongs to both spouses in equal shares. Even where the property is registered in the name of one spouse only, either because it was registered in his/her name prior to the change in the Deeds Registries Act or he/she purchased it before they got married, it belongs to both of them.
“The day they got married the other spouse legally acquired a half-share in the property, even though the title deed was not amended.”
The normal legal consequence flowing from such a marriage, he says, is that both parties retain their half-shares in the property. The one party can, in the summons at the start of the divorce proceedings, request that the other party forfeits his/her share, but the reasons therefore will have to be alleged and proved.
Settlement agreement
“Of course, the parties can conclude a settlement agreement – which usually happens – wherein they decide that the property should be retained by one spouse only, usually against payment of an amount to the other spouse representing the ‘pay out’ for his/her share.”
However, Milner often finds that parties are not aware of the costs involved with such agreements.
“Couples think that it is merely ‘a change of name’ on the deed, but it requires a transfer of ownership in the Deeds Office, with the usual conveyancing costs. They must also keep in mind that, if there is still a bond registered over the property, that bond must either be cancelled simultaneously with the transfer of ownership – with the remaining balance to be paid on registration to the bank by means of a new bond to be registered by the retaining owner, or the party retaining ownership must take over the existing bond.”
In both instances the banks will do a full credit application to see if the retaining owner can afford the bond on his/her own.
“Very often parties agree that the one spouse will ‘buy out’ the other spouse, but then when it comes to the practical implementation thereof, they realise that they cannot afford it.
“My advice would be that, before agreeing to such an arrangement, first check with the bank whether you qualify to take over or replace the existing bond, and also get quotes on the costs of the transfer of ownership and the bond registration.
“Usually with a divorce, there is not too much money lying around. Therefore, it could very often be best to sell the property and divide the proceeds equally. That will give each party much needed cash to make a fresh start,” Milner says.
While sometimes people wish to retain the property for sentimental reasons or because they want to remain in the property in order to not further disrupt the lives of minor children, “the finances to do that exercise is sometimes a sobering factor.”
Complications
Davey agrees that the issue of a bond on the home is one complication relating to property and divorce, as a change in ownership means that the bond has to be cancelled, and the debtor substituted/released.
“The bank will carry out an affordability assessment. Otherwise the property needs to be sold, the loan cancelled, and the proceeds dealt with as agreed.”
While many people have assumptions on how a court decides which party gets to keep the house, Davey says the most common scenario is the sale of the property.
David Campbell, also an attorney at Meumann White explains: “This is due to the fact that neither of the parties is able to afford the property individually – bearing in mind the bond installments, rates, and taxes, or, alternatively, they cannot decide between them who will retain the property and who will move out of the matrimonial home.”
Echoing Milner, attorney Simon Dippenaar of Simon Dippenaar and Associates, also finds that many people do not realise that, if they are transferring ownership of the property to the other spouse – for example, if the husband’s name is on the bond but the wife is remaining in the home – then the deed will need to be transferred to the new name, with the associated fees.
“If both names are on the bond, which is the most usual scenario for a married couple, then the process will depend entirely on the matrimonial regime.”
Citing Section 57 of the Deeds Registries Act 47 of 1937, Dippenaar says a substitution of debtor (SOD) is used when an existing owner takes over the obligation of a mortgage bond from a co-owner.
This section states that “the registrar may…register the transfer and substitute the transferee for the transferor as debtor in respect of the bond”.
He says the cost to register the transfer is “high”.
“On a R1m bond, the transfer fees are nearly R30 000. However, this only applies to owners with no relationship to each other or couples married out of community of property.
“Couples married in community of property pay no transfer fees. They are only required to pay a conveyancing tariff fee of R2 680 for a bond endorsement on the SOD. It is an administrative and relatively inexpensive solution.”
Couples married out of community of property must pay full transfer fees, Dippenaar notes.
No favourites
There is no rule as to who gets the property, Milner states.
“If the one party feels that he/she can afford the property and wishes to retain it, they can simply agree to it. Such an agreement will obviously depend on the valuations that they obtain for the property and the amount of the ‘pay out’. If the one spouse feels that he/she will get a better price if they sell the property and divide the proceeds, that spouse cannot be forced to accept the offer of the other spouse.”
Failing an agreement, he says the court will usually order that the asset be sold and the proceeds be divided equally.
“So the spouse making the offer will have to make it something worthwhile to consider. If both can afford to retain the property and are adamant that they wish to keep it, they will have to sell it or, alternatively, once again, the court will order it. To retain the property in co-ownership is definitely not recommended.”
If the marriage is out of COP though, irrespective of whether the accrual system applies, Milner says the process “could be slightly simpler”.
FOR QUICK READING: Marriage contracts in a nutshell
Dippenaar sums up the impact of the marriage contract on property during divorce:
– Marriage in community of property
In such a marriage contract, all assets and liabilities belonging to each spouse are merged together into one joint or communal estate. On divorce, assets are divided equally, including the property.
“In a marriage in community of property, it does not matter whose name is on the deed, as the marital estate is a joint estate. However, who in practice retains the matrimonial home is not a simple question and will depend on the facts and circumstances of each case.
“If one party is financially dependent on the other, continued residence in the matrimonial home may form part of a spousal maintenance claim, particularly if there are children of the union and it is their family home.”
He says many couples feel divorce is enough disruption for children and don’t want to add the distress of losing their home to the upheaval of their parents’ divorce. Another common outcome is that one spouse buys out the other spouse’s share in order to remain in the home.
– Marriage out of community of property WITHOUT accrual
In this marriage contract, each spouse retains their own assets and liabilities, and, on divorce, keeps their own estate along with any growth that accrued during the marriage. In terms of ownership of a fixed property, couples married under this regime are often advised to register joint ownership over the property so one spouse is not prejudiced financially at a later stage if the marriage is dissolved.
“For example, if a husband and wife purchase a family home but register it only in the name of the husband, the property will be deemed to belong to the husband in the event of a divorce, even if the wife contributed towards the property and shared the bond repayments. On divorce, the wife may find herself without a home to live in and may find it difficult to prove the financial contribution she made.”
Formal joint ownership resolves this problem, Dippenaar states.
– Marriage out of community of property WITH accrual
This marriage type is the “most complex” of the three regimes. It allows the spouses to retain the assets they owned before the marriage but share in any gains made during the marriage. Mathematically, he says, the difference between the net increases in the respective estates during the marriage is divided equally between the two when the marriage is dissolved.
“For example, one spouse owns a property worth R1 million prior to marriage, and, 10 years later, the couple files for divorce. The property is now worth R1.5m. The net increase (R500 000) is the accrual. This is then divided equally between the parties.
“The same calculation is applied to the entire estate. As marriage out of community of property, with or without accrual, requires an antenuptial contract, it is possible the couple may have included this eventuality in their ANC.”
Again, he says, joint ownership of an immovable property ensures both spouses’ entitlement to their share of the property on divorce.
“Whether one spouse remains in the property or the property is sold and the proceeds divided between them is a matter for the divorce settlement.”
How to protect yourself
Ownership is always the best way to protect yourself, Milner says.
“Therefore, if you are contributing to the asset, make sure that your name is on the title deed representing your share...If that cannot be done, the second option is to conclude an agreement with the spouse who is the sole owner, which states what contributions are being made, what will happen when the property is sold, and what will happen on divorce.
“However, I always say to my clients, it remains a piece of paper. Yes, it is a valid agreement and enforceable in a court of law, but you will have to go through the courts to enforce it, which may be a long and costly process. By the time you obtain a judgment against the other spouse, the property might be sold and the money spent. If that spouse has no assets to attach, your court order won’t put money in your pocket.”
To protect yourself and your property interests in the case of divorce, Davey agrees that you should have a partnership agreement as to how the property is to be dealt with, and how repairs, maintenance, upkeep, rates, taxes, and rentals are to be dealt with.
“Such an agreement will be binding between the parties but not necessarily third parties.”
The best way to protect your rights to the matrimonial home, Dippenaar says, is to ensure your name is registered as a co-owner of the property.
“There is no right stronger than a real right registered against the immovable property.”
Campbell adds: “Whilst parties generally do not want to think about separating when they are acquiring their matrimonial home, this is, unfortunately, a reality that, if dealt with upfront, can prevent a lot of issues down the line.”
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