It is not uncommon that following a separation one party remains in the family home and pays the mortgage repayments and the other party leaves and accommodates themselves elsewhere, usually paying rent. It may be some time before they achieve property settlement (i.e. divide their assets), and even longer if they have to go to a Court hearing about that. In the meantime, one is paying off the house and the other isn’t.
We often get asked whether there is a “credit” in favour of the spouse who pays the mortgage.
While these sorts of payments are something that the Court can take into account when determining what each party is entitled to pursuant to the Family Law Act, the answer to this question is usually very straightforward – probably not. The party in occupation, who has met the outgoings on the property including home loan payments and the like, has had the use and enjoyment of the property to the exclusion of the other party. Ordinarily normal outgoings will be set off against the accommodation value of the property to the party in occupation, unless the mortgage or payments are exceptionally high and have resulted in a significant increase in the equity of the property.
On the other hand it would ordinarily not be appropriate to take into account the cost of accommodation of the party who has been out of occupation and had to pay rent, unless there is some particular circumstance to justify that.
The sort of circumstance where payment of mortgage might justify an adjustment in that party’s favour would be where the mortgage payments were inordinately high, far greater than the rental value of the accommodation that the party is receiving.
However the situation may be different if there is no mortgage on the home and the party who stays there has no significant accommodation costs, whereas the other party has rent to pay. It those circumstances an adjustment in favour of the renting spouse will usually be made in a property settlement. The amount of that adjustment will vary from case to case and will depend on the total of the rent paid and all the other considerations set out in the Family Law Act.
Overall, every case is decided on its own facts and the Court is careful to avoid laying down strict principles as to which must be applied regardless of the individual circumstances of the case. As a general guideline the Court adopts the approach above. You should seek advice from us if you want to know about what would happen in your case.
Related Articles
- Who Pays the Mortgage, Bills and Other Expenses After Separation?
- Post-separation Contributions – What Happens to Property and Income Acquired After Separation?
- How to Divide Property During a Divorce (A detailed but easy to follow guide)
- Property Settlement (Divorce Settlement) in Family Law
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Article By: Zoe Behrens
Family Lawyer
Zoe is a compassionate, dedicated and strategic family lawyer with a background in people management and behavioural science. Zoe’s passion for helping individuals and families navigate complex issues led her to specialise in family law. Having worked across both our Canberra and Sydney offices, Zoe has experience running complex parenting and property disputes in both the Children’s Court and the Family Court involving difficult dynamics and family violence.