What Happens To Jointly Owned Property After Separation?

It is common for married or de facto couples to own property as joint tenants in equal shares. In Australia, each party has an undivided 50% interest in the whole property. It is important after separation, to consult legal practitioners and come to an agreement about how property and other assets are to be split. Separation or divorce does not automatically change the legal arrangement or remove ownership rights. The property owned jointly by a couple may be considered part of the marital asset. To avoid disputes and ensure a fair division of property and assets, it's important to seek legal advice from professional family lawyers and work toward a formal agreement on how the property will be dealt with.

Property settlement can be resolved through informal agreement, formal legal processes such as Binding Financial Agreements or Consent Orders, or, if necessary, through court proceedings.

Four Options for Dividing Property After Separation

Dividing property is a key part of the separation process. In Australia, this is known as a property settlement, and it includes not just the home, but also assets like savings, superannuation, and debts.

The law doesn’t assume a 50/50 split. Instead, property must be divided in a way that is just and equitable, considering each person’s contributions and future needs. While court is an option, separating couples are encouraged to reach agreement through negotiation or mediation wherever possible.

There are four main ways to divide property after separation ranging from informal agreements to legally binding court orders when splitting their property:

1. Make a Non-Legal Agreement: 

This is an informal private agreement between the parties which covers how assets will be divided between them. This does not mean the parties lose the right to go to the family courts and seek financial orders. If there are points of disagreement, dispute resolution or mediation can help resolve these issues.

2. Binding Financial Agreement (BFA):

Is one of the ways a non-legal agreement can be formalised. This can be entered into at any time before, during or after the marriage or de facto relationship. Unlike informal agreements,  they are enforceable but are not final, so there are some circumstances where they can be set aside by the courts. The parties must seek independent legal advice before drafting a BFA.

3. Consent Orders

Is another way a non-legal agreement can be formalised. They are court orders made with the consent of the parties. Signing a draft consent order means the parties will agree to and comply with the terms. Unlike a BFA, consent orders are final but can be set aside in limited circumstances. However, it is the responsibility of the parties to prepare the orders they want and provide the necessary information to the family courts. 

Formalising the agreement means that the parties won’t have to pay stamp duty on the property transfer. Generally, settlement documents must also consider details including who will pay the mortgage repayments, rates, insurances and utilities up until the time of the transfer. 

4. Litigation

If the parties cannot agree on issues, they can apply to the Federal Circuit and Family Court of Australia for financial orders in relation to the division of property. They have the power to make orders for both married and de facto couples. For married couples, applications for property adjustments must be made within 12 months of the divorce being final. For de facto couples, they must be made within two years of the breakdown of the relationship.

However, the couple must meet the requirements of a de facto relationship under 4AA of the Family Law Act 1975. General principles the court will consider in relation to property settlements include the parties’ assets and liabilities, and their direct and indirect financial contributions to the property.

What Happens to the Property After Separation? 

Once a property settlement has been agreed upon whether through a Binding Financial Agreement, Consent Orders, or a court decision the next step is to carry out the transfer of property ownership. This can take a few different forms depending on the agreement. 

Each of the options involves specific legal and administrative processes, including notifying lenders, updating land titles, and potentially lodging forms with the relevant land registry. It’s important that these steps are handled correctly to ensure the agreement is legally effective and enforceable.

Property ownership will either be transferred, or joint ownership will be retained. Alternatively, the parties may wish to sell the property. 

Retaining joint ownership

Legally, a divorce doesn’t automatically sever a joint tenancy. An option for both parties after separation is to convert their interest from joint tenancy to tenancy in common. This means the parties can now hold distinct shares of the property which don’t have to be equal. To convert the parties’ interests to tenancy in common the parties must: 

Serve a notice of severance

The party wishing to convert their interest must serve the other joint tenant with notice of their intent to serve. This must be clear, unequivocal and adhere to any statutory requirements.

Lodge documentation

Appropriate documentation must be lodged with NSW Land Registry Services, so the property’s title is changed to reflect the new ownership structure. The parties are required to fill out a Transfer Form 01T and provide the title that is being transferred. 

Transferring ownership

If one party wishes to retain sole ownership of the property, they must provide sealed copies of their consent orders or BFA to their lender. They must check with their lender to confirm their borrowing capacity, if sufficient funds are needed to repay the mortgage. 

The document must include a timeframe for the other party to transfer their interest in the home to them. This typically occurs at the same time they pay out money to discharge the current mortgage. This takes place with the help of a lawyer, via PEXA, an e-conveyancing platform. This will complete the property transfer.

Selling the property

If property is to be sold, each party must explicitly agree to sell the property for the asking price. If one party doesn’t consent, the other party must apply for a court order to settle and sell. Proceeds from the sale are generally used to pay off any of the outstanding mortgage. Any remaining proceeds are typically divided according to the order or agreement made between the parties. It is always important to seek legal advice when looking to transfer property ownership after separation.

Trusted Legal Advice for Fair Property Division

Managing property settlement after a separation especially when there is joint ownership can be complex and emotionally challenging. Whether you're looking to transfer ownership, sell the property, or formalise a financial agreement, it's essential to ensure every step is handled with care and legal precision. 

The Norton Law Group specialises in family law and provides expert legal advice and support throughout the entire property settlement process. With a commitment to achieving a fair and just division of assets, our expert property settlement lawyer team in Sydney is here to guide you with clarity, confidence, and compassion.