One of the biggest considerations when parties separate is who will pay the mortgage and other expenses in the intervening period before parties reach an agreement. Generally, these expenses don’t stop when two people separate- and parties to a relationship which has broken down often see a drastic increase in other expenses as a need arises to pay for things like substitute rental properties, legal fees, psychologists and moving expenses.
Payment of interim expenses and the need to access funds prior to finalising your property settlement can be a key reason parties end up in Court on an urgent basis.
Mortgage
As a starting point, it is important that people prioritise continuing to pay scheduled mortgage repayments following separation. Failure to pay can have implications for both parties, including on their credit rating or (more drastically, and if not quickly remedied) a forced sale of the home by the bank. Parties should also consider putting their re-draw facilities on a two-to-sign basis- meaning both parties will have to agree prior to any funds being released. Taking funds out of the redraw facility unilaterally may trigger the other party to take urgent Court action. This is costly and stressful for everyone, and in many cases could have easily been avoided.
Typically, when both parties earn an income, and one needs to pay rent elsewhere, a common arrangement when someone leaves the family home is for the party that remains in the home to pay the mortgage repayments, with the person leaving paying rent at the new accommodation. With increasing interest rates and larger household debt, this is becoming less achievable for many couples. Separating couples should attempt to negotiate an arrangement for the payment of household expenses including the mortgages prior to making changes to living arrangements, and parties should aim to ensure that they are able to sustain interim arrangements until an agreement is reached on a final basis. This is particularly important is cases where one party has access to more of the funds and income of the relationship than the other party. Negotiate, negotiate, negotiate!
If you aren’t able to reach an agreement, you should seek assistance from an experienced family lawyer and your financial advisor. Your advisors can help you to conduct an assessment of the relevant expenses, funds/resources available and the income streams of both parties and guide you as to the best course of action. It may be the case that your family lawyer advises you to commence proceedings in the Federal Circuit and Family Court of Australia to seek urgent financial relief if an agreement cannot be reached. Usually, Court can and should be avoided, but in some cases, this is the only way to obtain an arrangement for the payment of interim expenses without agreement from the other party.
In determining what interim orders should be made, the Court will consider a whole range of relevant considerations, including:
- What the arrangements were prior to separation;
- Who is paying for what expenses (including for the children);
- Each party’s capacity to pay, living arrangements and intentions and capacity.
If your matter reaches Court and it is clear that neither party has capacity to pay the mortgage on an interim basis, the Court may order that the property be sold. Getting advice early is the best way to avoid this outcome.
Children’s expenses
Both parents have a duty to support their children after separation. Separating couples should attempt to negotiate an arrangement for the payment of expenses for their children prior to or at the time of separation, following seeking advice. Generally, an assessment by Services Australia for Child Support may not be sufficient to cover expenses such as private school fees, extra-curricular activities and private health insurance. Any agreement reached privately about the payment of various expenses won’t be binding unless it is formalised properly.
If you have separated and are not receiving financial support for your children, you should seek advice urgently.
Will it ‘come out in the wash’?
A common question we get asked is whether it will ‘come out in the wash’- i.e. whether a party will receive ‘credit’ for continuing to make payments or financially supporting the children when the matter is determined on a final basis. In typical lawyer fashion, the answer is – it depends.
If your matter reaches litigation (i.e. determination by a Court), then post-separation contributions can be considered. However, the Court takes into account a range of factors, and in some cases, post separation payments may not result in an adjustment.
The best advice is to obtain advice early and before you make any significant changes to your living arrangements and finances.
You should seek the advice of our specialised family lawyers if you are going through a separation and need financial assistance and prior to making any decisions about your family law matter.
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Article By: Zoe Behrens
Family Lawyer
Zoe graduated from the University of Technology, Sydney and began her career working at the Administrative Appeals Tribunal and then the ACT Magistrates Court as a Legal Associate. At university her combined Management and Law degrees developed her interest in people and behavioural science- which led her to pursue a career in family law. She is particularly interested in matters involving family violence.