It is virtually impossible to think about divorce when you’re engaging in an exciting and uniting activity like getting married, or buying a house together. But whatever stage of life you are in, you should definitely think about how you would go about dividing assets, should that unhappy reality of divorce arrive.


Seek Financial Advice Prior to Buying Property with a Partner

If you are in a relationship, not planning to get married or do not want to marry but would like to purchase property with your partner, it is advisable to seek financial and tax advice from your investment advisor, accountant, work colleague or friend who owns property.  There are property co-ownership considerations to be aware of including first right of purchase, tax implications if one partner become insolvent or bankrupt, or one or both of your deaths.


Property Co-Ownership and Divorce


Consider a Pre-Nuptial Agreement

Divorce is another matter, however, and pre-nuptial agreements are not just for celebrities. When it comes to getting a divorce, the Family Law Act may override property co-ownership agreements. If both parties have a binding agreement under the Family Law Act, then the outcome during the divorce will be based on that. Whatever was detailed in that agreement will be enforced. Specifically, how both parties intend to deal with the property belonging to either one of them, or both in common, in the event of the marriage breaking down.

Understanding the current status, your options, and the implications for both of you with the next steps is crucial to ensure a harmonious transition through the property settlement process (if at all possible).


Property Co-Ownership and Divorce


Choosing a Property for Co-ownership

The Family Law Act 1975 (the Act) says that grounds for divorce are that the marriage has broken down irretrievably, which is evidenced by the parties to a marriage being separated for a period of not less than 12 months. People can live separately in the same house and do so by living in a separate room. Read more about how you determine the date the separation started in the ‘Dealing with Divorce’ Guide that you can download here.


Property Co-ownership Structure

When you buy a property with another person, you are choosing to co-own, however this term can be interpreted in a couple of different ways, depending on the co-ownership structure you choose. Each has their own risks and benefits and it’s really up to each individual to make the best decision for themselves – hopefully with independent legal advice.


Property Co-Ownership and Divorce


Tenancy in Common  

Tenancy in common is one structure of property co-ownership and means that each co-owner has a specific share of the property. In the event of an owners death, they can bequeath the property to a beneficiary of their choice. It may be the other co-owner, if they choose, or family members such as children or grandchildren or even friends. The point is that it offers a much more flexible arrangement for both property co-owners, giving you pre-established shares in the property. One of the unfortunate implications of this arrangement is that the property may need to be sold in the event of the death of one co-owner.


Joint Tenancy

This means that neither of you have a proportion of the property, but that the two of you as owners exist as one entity (where the property is concerned) and own the property as such – as one entity. If one of the joint tenants dies, ownership of the property is automatically transitioned to the surviving owner.


Property Co-Ownership and Divorce


Co-ownership Agreement

Once you have chosen the most suitable property co-ownership structure, you should get a co-ownership agreement drawn up by a professional. The agreement should clearly state the ownership structure, and in many cases can also outline all the other points agreed upon, such as division of expenses (like cleaning and maintenance of the property, rates, utilities etc.), agreement on direct debits for regular payments such as the mortgage, and division of management tasks like who co-ordinates tradesmen for example.

Remember, there are professionals out there with expertise to advise you on things such as this. Getting advice from a financial advisor and a family lawyer when you are putting things in place, can make everything so much easier to undo, in the unhappy event of a divorce or untimely death.


Download our Dealing with Divorce Guide



The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions. Click here for full Terms of Use.