Late last year, the Law Commission proposed substantial changes to the way relationship property is dealt with on separation.
Notably, there is a suggestion that the family home should not always be shared 50/50.
This may draw a sigh of relief from the many who have heard the horror stories of friends and family losing substantial equity in their homes due to the current strict interpretation of the family home as relationship property.
The law must keep up with social change and reflect the 21st-century environment. Couples are entering into relationships later in life and bringing with them substantial assets built up from separate property or previous relationships. These should be protected.
The automatic classification of the "family home" as relationship property has a significant impact on the home-owning partner if the relationship comes to an end in the short to medium term.
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For example, one partner has owned a house for many years prior to the relationship. Due to a combination of the home-owner's own contributions and money gifted by a parent, the house is mortgage free.
This partner enters into a relationship and the new partner moves into the house. The parties have been living together for just over three years and they separate.
The house, now the "family home", is likely to be available for equal division under the Property Relationship Act 1976. These situations are increasingly common and give rise to a sense of unfairness where the relationship was seemingly short term.
There are very few exceptions to the principle of equal sharing, and only if there are extraordinary circumstances which render equal sharing repugnant to justice.
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Many people continue to form a trust to own the family home in an attempt to avoid the equal-sharing rules, however this no longer guarantees protection. Included in this report is a proposal to give the court greater powers to share trust property when that property was produced, preserved or enhanced by the relationship.
The only way to protect the family home is to ring fence it as separate property in a Contracting Out Agreement. Both parties must receive independent legal advice before signing.
The Law Commission has proposed that if one partner owned the home before the relationship, only the increase in value during the relationship should be available for division.
This would isolate and protect the equity in the property prior to the relationship as separate property.
Homes acquired during the relationship will still be shared equally.
In light of the wide variety of family situations these days, some aspects of the current relationship property law is out of date.
The Law Commission has tabled its report in Parliament with hopes of legislative change on the horizon – watch this space.