What Happens To A House or Property When You Divorce - Who Gets House Ownership?
Historically 44% of South African marriages have ended in divorce, and there has reportedly been a 20% surge in new divorce applications since lockdown. For those unfortunate couples whose marriages do eventually fall apart, often the most important asset in play from both a financial and an emotional perspective is the family home. So it is crucial for any couple contemplating marriage, or currently married but considering a split, to understand what our law says about who gets what on divorce.
Your divorce order as issued by the divorce court will be the "final word" here. If you have been able to agree on a split of assets and liabilities your agreement will typically be contained in a "consent paper", and agreement is of course very much "first prize" here. Particularly if you have children - exposing them to a bitter fight over assets and to the risk of having to leave their childhood home and neighbourhood will only add to the disruption and the trauma in their lives. In any event if you can't agree to the terms of the divorce, you are in for some emotional, time-hungry and expensive litigation before a court finalises the split for you.
A variety of factors will be at play here, all linked to the question of what "marital regime" applies to your marriage so the first question you need to ask is whether you are married in or out of community of property - and if out, does accrual apply?
If you are married in community of property
This is the default marital regime for South African marriages, and if you didn't sign an ante-nuptial contract ("ANC") before you married, all your assets and liabilities at date of divorce (with a few specific exceptions) will automatically belong to both of you in "undivided shares" i.e. 50/50.
Typically, your divorce order and/or consent paper will provide for one spouse to become the 100% owner of the communal home, with a suitable financial adjustment between you to account for the value of the other spouse's 50% share.
No formal transfer of the share in the property in the Deeds Office is needed, your attorney will just arrange for an endorsement on the property's title deed to transfer ownership.
If you are married out of community of property
You have two separate estates and what you bring into the marriage remains yours, as does any growth in asset value during the marriage, depending on whether the accrual system applies or not.
As to who keeps (or gets) the house, and as to how much if anything the other spouse must pay in return, that will depend on a host of factors including the terms of your ANC and whether you were married with or without "accrual".
"With accrual" is the default unless you specifically opt to marry "without accrual". In practice most modern couples specifically opt for accrual, in which event the difference in growth in value between the estates, if any, during the marriage of your two estates will be split between you.
If the house is currently registered in only one of your names and that spouse is to keep the house, no formal transfer nor endorsement of the title deed will be necessary. If however the other spouse is to become the registered owner, a full transfer of ownership in the Deeds Office is needed. Although an exemption from transfer duty applies in this case, there will still be other transfer fees and costs to consider.
If you are co-owners of the property (in other words, if you are jointly recorded as owners on the title deed) you may want to transfer the one's share to the other spouse. Again, a transfer will be needed. There is however nothing to stop you agreeing on a temporary or permanent continuation of the co-ownership after divorce, perhaps to minimise disruption to your children's lives, or perhaps while you jointly market and sell it at the best price (in which event your agreement should specify in detail who will pay what costs, what the minimum purchase price will be, interim arrangements, and so on).
Who pays off the mortgage bond?
If you are currently registered as co-owners, both of you will be equally liable for the full remaining debt owing to the bank. If one of you is the owner and the other is to take transfer, the current owner remains solely liable for the loan debt until released by the bank.
Whichever spouse keeps (or takes over) sole ownership of the house will have to make a new loan application to the bank in his/her own name and be substituted as the sole debtor/mortgagor.
If you get the house, how will you pay out your ex-spouse?
As above, normally there will be a financial adjustment between you to compensate the other spouse, and if you don't have the funds available you may need to ask the bank for a second mortgage.
You could of course also agree to sell the house and split the proceeds after settling the existing bond.
What if our house is owned by a trust or company?
Houses and other properties have historically often been held in trusts or companies for estate planning and asset protection purposes, and our courts are regularly called upon to resolve bitter disputes along the lines of "it was all a sham, the house never really belonged the trust, so please Judge order the trust to put it back into the pot as a personal asset". Here the law refers to "piercing the corporate veil".
The spouse making such a claim will generally have to prove some form of "abuse" of the trust before a court will order that the house in fact belongs to the other spouse personally. But there are grey areas here and professional advice specific to your particular circumstances is essential.
Prevention being better than cure....
Your house could well be your marriage's most important asset both financially and emotionally. Rather than fight over it when divorce looms, seek professional advice before you tie the knot on what marital regime is best for you, and on how best to sort out who gets the house if you should be unlucky enough to part ways down the line.
In closing:
The above is a very simplified summary of the various scenarios one may face in a divorce. Remember, that it will not only be your ex-spouse that will have to be paid. All transactions in the deeds office will carry conveyancing costs and deeds office fees. In addition, you will require a rates clearance certificate, a levy clearance certificate (if the property is part of a housing scheme) and possibly, compliance certificates. The bank that agrees to the substitution of debtor or that grants a new bond will also charge an initiation fee that may be payable in advance. Anyone contemplating taking over ownership of a property, or a share therein, following a divorce would therefore be wise to obtain a quotation for all of this work from a firm of conveyancing attorneys before agreeing to a settlement on this basis.
This article was published recently by LawDotNews. Miltons Matsemela Attorneys have made minor amendments to the text to clarify aspects of the article that they thought were of importance.