With an increase in the number of renters and landlords, the amount of rented property being a consideration during divorce is at an all time high. So, what can you do if you are the tenant or the spouse of the tenant? Does it make a difference if you are named on the tenancy agreement, or it is in your spouse’s sole name? What if you are a landlord? What might happen to this property on divorce? We look at the issues.
Rented property as a marital asset
The increase in rented accommodations means that a greater number of divorces now involve decisions about what happens to the rented property. While a home that is rented may not be a financial asset in the same way that a mortgaged property is, it is nonetheless a significant consideration.
The treatment of a rented property in divorce depends on whether both spouses are named on the tenancy agreement or whether it is held in one spouse’s sole name.
If both spouses are named jointly on the tenancy agreement
If both spouses are named on the tenancy agreement, they are joint tenants. This means they both have equal rights to live in the property, and are both are equally liable for the rent and any other obligations under the tenancy.
In the event of a divorce, the question of what happens to the rented home can become a part of the divorce settlement, similar to how ownership of a house would be treated. If both parties agree, one spouse may decide to move out, while the other remains in the property and takes over responsibility for the rent. In this case, both parties can either negotiate for the tenancy to be transferred into the name of the spouse who is staying, or they can both continue to be liable for the rent until the tenancy is terminated.
Where there are children involved, the family court is likely to prioritise their needs. The court may decide that the parent who will have day-to-day care of the children should remain in the property to provide stability. In such cases, a court can order a transfer of tenancy to the spouse staying in the home under the Family Law Act 1996. This Act gives courts the power to decide who should stay in the home and transfer tenancies between spouses during divorce, provided certain conditions are met.
What if only one spouse is named on the tenancy agreement?
If the tenancy is solely in one spouse’s name, the situation can become more complex. Legally, the spouse whose name is on the tenancy has the right to occupy the property. However, the spouse who is not named may still have certain rights under family law.
Under the Matrimonial Homes Act 1983, a spouse who is not named on the tenancy can apply for what is known as “home rights.” These rights give the non-tenant spouse the right to continue living in the property, at least temporarily, even though they are not the official tenant. This can be crucial in situations where one spouse wants to remain in the home, particularly if there are children involved.
It is important to note that the non-tenant spouse will still need to obtain a new tenancy agreement in their name if they wish to stay in the property after the divorce is finalised. The court can intervene and order the transfer of the tenancy if they deem it appropriate, for example, to safeguard the welfare of children.
What happens if both spouses want to stay in a rented property?
If both spouses wish to remain in the rented property, and both are named on the tenancy, they could negotiate a solution with the help of their solicitors or through mediation. Alternatively, if they cannot agree, the matter may be brought before a family court, which would make a decision based on several factors, including the needs of any children and each spouse’s financial circumstances.
The court may order one spouse to remain in the property and assume responsibility for the tenancy, while the other spouse moves out. In these cases, the tenancy might be transferred to the spouse who is staying, although this depends on negotiations with the landlord. A spouse who has been violent or abusive might be ordered to leave.
What happens on divorce if you own a rented property?
In a divorce, all assets owned by the couple, whether held jointly or in one spouse’s name, are considered part of the matrimonial pot. This includes rented properties, even if one spouse is primarily responsible for the day-to-day management of these assets. The court looks at the entire financial situation of both parties, and rental income, as well as the value of the properties themselves, will be factored into the financial settlement.
If the rented property was purchased or maintained using joint funds, or if it is considered a significant part of the couple’s financial resources, it is highly likely that the property will be viewed as a marital asset, even if it is in the sole name of one spouse.
One of the first steps in determining how a rented property is dealt with in divorce is establishing its value. This includes not only the market value of the property but also the rental income it generates. For landlords with multiple properties, the rental income may be a substantial part of the marital assets and, therefore, considered in the overall financial settlement.
In some cases, one spouse may be required to transfer ownership of a rental property to the other spouse as part of the settlement. If the properties are part of a broader rental business or portfolio, one option may be to divide the portfolio between both parties, giving each a share of the assets and future rental income.
Alternatively, the court may order the sale of a rented property, with the proceeds being divided between the parties. This can be particularly relevant if the couple owns only one or two rental properties, and there isn’t an easy way to divide the assets. The sale allows both spouses to walk away with liquid funds rather than continue to have shared responsibilities over a property.
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