If you are going through a separation or divorce, it is important to understand where you stand in relation to your real estate assets and how any transfers of property will be executed. Understandably, during such an emotionally charged and stressful time, it can be challenging to know which steps to take as well as stay focussed on the many legalities involved in the process.
The good news is there are clear steps to follow prior to the transfer of property during separation or divorce. Plus, once these are in place, you won’t need to hire an expensive lawyer to handle the transfer of your assets.
Below are the key steps involved in transferring a property after separation.
Binding Financial Agreement and Consent Orders
The first items you need to get in place are your Binding Financial Agreement or Consent Orders outlining how you and your former partner will divide your financial responsibilities once separated. These are especially important if you have shared property assets as Binding Financial Agreement and Consent Orders are time sensitive and required to take advantage of possible duty and tax exemptions. Please note: seeking legal advice before negotiating any financial agreement is highly recommended.
- What is a Binding Financial Agreement? In the case of separation and divorce, a Binding Financial Agreement is a legally binding agreement between a married or de facto couple which states how your assets, liabilities and financial resources will be divided after separation. It is important to know that whilst you and your partner may be able to agree on a financial settlement in principle, you cannot create a Binding Financial Agreement without using a lawyer. Due to the binding nature of this document, you must use a legal professional to create this agreement, otherwise the Binding Financial Agreement may not be enforceable.
- What are Consent Orders? Once you have a written Binding Financial Agreement, you can apply to The Family Court to accept financial Consent Orders based upon your agreement. It is possible to file your Consent Orders with The Family Court without a lawyer, however Consent Orders must first be drafted by a qualified lawyer or solicitor. Consent Orders are written, formal orders which are approved by the court and carry the same legal bearing as if they had been made by a judicial officer of the court. Time restrictions for filing property and financial Consent Orders are as follows: An application can be filed any time after separation but should be filed within 12 months of a divorce or 2 years of the breakdown of a de facto relationship. If filing Consent Orders outside of these time periods, you will need to seek leave to file the application – from https://www.familycourt.wa.gov.au/C/consent_orders.aspx
Obtain Consent of Mortgagee (Financial Institution) Prior To Commencing Transfer
If there are existing mortgages or loans against your residential home or investments properties you need to establish how these will be handled in order to fulfil your Binding Financial Agreement and Consent Orders.
- Speak with Your Broker – If you used a Mortgage Broker to arrange your property finance, contact them to explain your situation. They can provide advice on options such as removing a partner from a mortgage, one partner buying the other one out of a property, or refinancing to create a new loan. They can also speak with your bank or financial institution about securing Consent of Mortgagee approval prior to commencing the property transfer.
- Obtain Consent of Mortgagee – To obtain a Consent of Mortgagee from your financial institution you must be able to prove that the partner retaining a property, and corresponding loan, is able to service the mortgage. Assessment criteria for gaining approval will include a good repayment history on your current loan, proof of funds to pay out your partner, if applicable, and a signed transfer from the partner who is exiting the property. To assist with calculating your financial position you can use online tools such as mortgage and divorce separation calculators, speak to your Mortgage Broker or financial institution.
Exemptions When Transferring Between Separating Partners
There are specific exemptions available to partners and spouses when transferring property ownership as a result of a separation or divorce settlement. Being aware of these exemptions and the guidelines surrounding them can save you both time and money.
- Capital Gains Tax – In most cases when separating partners or spouses transfer ownership of the family home as part of a divorce or domestic relationship breakdown settlement, it is exempt from Capital Gains Tax. However, this exemption does not generally carry across to the transfer of investment properties and other assets. Therefore, it is important to seek professional advice to assess Capital Gains Tax exposure for each party when separating assets and negotiating your Binding Financial Agreement.
- Stamp Duty Transfer – You will not be liable to pay Stamp Duty on the transfer of property during separation or divorce related property settlements as exemptions are in place to waive these fees. However, to be eligible, you must have either a Binding Financial Agreement or Consent Orders in place to avoid paying the Stamp Duty on the property transfer.
Who Can Complete A Separation Transfer?
A separation transfer of property is generally completed by either:
- a lawyer
- a settlement agent
- or you can do it yourself
However, to save yourself time, money and the potential stress involved in navigating the legalities of the property transfer and settlement process, we recommend that you speak with one of our qualified conveyancers or settlement agents. As your settlement agent, we will act for both parties collectively to manage the property settlement process through the required stages to completion. With our team efficiently handling your property transfer, you can relax knowing that all details will be taken care of for you.
How Much Does A Separation Transfer Cost?
The cost of a settlement transfer will depend upon the fees charged by the qualified professional managing the process. These can vary greatly, but using a lawyer may cost you up to $2,000 or more. However, by using a conveyancer from Residential Settlements we could do the process for around half of this figure, saving you a considerable amount of money. Call us for a quote.
In addition to the costs of managing the property transfer and settlement, there are specific fees associated with processing the transaction with the relevant government authorities, such as the Office of State Revenue and Landgate. We are happy to discuss these with you.
Transferring Investment Properties
If you have investment properties which form part of your divorce or separation settlement, we can also handle the process of property transfer for you. As discussed, there may be some Capital Gains Tax implications in regards to investment properties, so please speak to your qualified advisor to assess your specific situation.
Obtaining Legal Advice
As already outlined, the process of creating a Binding Financial Agreement, Consent Orders separating assets and understanding your obligations during a transfer of property due to separation or divorce are important and binding steps to take. We therefore strongly recommend that you always seek legal and financial advice from qualified professionals before proceeding.
How to Execute a Transfer of Property at a Glance
If you are considering managing the transfer and settlement of your property yourself, following is a brief outline of the steps involved:
- Gain your Binding Financial Agreement or Consent Orders
- Obtain Mortgagee Consent from your bank or financial institution for an existing mortgage or to refinance
- Confirm finance approval
- Apply for transfer of property in accordance with Consent Orders
- Verification of ID
- Arrange discharge bank mortgage
- Arrange new bank finance if applicable
- Sign mortgage documents
- Prepare Transfer of Land
- Assess Transfer of Land for duty payable
- Arrange for settlement
Or you can trust Residential Settlements to handle the whole process for you and save yourself precious time, effort and energy during a time which is traditionally very challenging and stressful for those involved.
If you’d like to chat to one of our conveyancers about a separation transfer, call us today on 08 9459 0044.
