Rights of Occupation
If you are joint owner you already have these rights. If not - you may need to register your right to occupy the property - this will be detailed in land registry records (or you can check with the lender on any mortgage you may have on the property). This will normally be handled by your legal adviser.
Property Ownership and Land Tenure
Joint Tenancy - This is where you jointly own the home, there is no specific interest or percentage share - you each own the whole property. This is so that under a jointly owned property (joint tenancy), if one partner died the ownership of the whole property will pass to the surviving spouse. This avoids any dispute by other family members in the event of death.
Tenancy in common - This is where the interest in the property is fixed. Each partner has a specific interest in the property. It is normal for each partner to have a 50% share.
Point to note - Whilst in the negotiation stage of a divorce settlement, some solicitors may advise you to issue a "notice of severance" of a joint tenancy. It can be done in the form of a simple letter - but basically means that if you died whilst within divorce negotiations, your share of the property would not necessarily pass to your ex-partner (as it would under joint tenancy) but become part of your own estate and be dealt with according to your wishes in your Will. If you have not made a Will, we suggest that you visit Wills Adviser.com.
What may happen to the home?
Sale - and divide any proceeds (equity). It is normal for a property and therefore, any equity, to be jointly owned by both parties. Sometimes, this is not the case and ownership may be on a different share. However, the assets can be distributed according to a financial settlement agreed between both parties using offsetting (e.g. one partner retains a greater share of the property value as the other partner is retaining other interests). If the matter has proceeded to court, then the courts can also issue orders for disposal of the property and distribution of the assets.
There are many factors that may affect the decision of sale or not such as:
Whether there are children involved? In whose name the property is in. If there is equity in the home (i.e. the property is worth more than any outstanding mortgage). Who paid the mortgage? Who raised the deposit? etc.
We recommend that you always seek professional help when dealing with property matters, request legal advice now.
Transfer of ownership - It can be that an order is made to transfer ownership of the property from joint ownership to sole ownership. This does not normally present a problem if one party offers to buy the other party's share. However, problems can arise if the property still has a mortgage on it. The courts can order the transfer of ownership (the title) of the property but they cannot order the transfer of the mortgage. It is therefore possible for one spouse to own the property but to still have the mortgage in joint names and therefore be jointly liable for any mortgage payments.
This is common where one spouse does not work, or does not have enough income to sustain the mortgage. As part of a divorce settlement, it may be that the former spouse, who no longer will own the home, is required by the lender to offer some form of guarantee to cover the payments should the occupying spouse default (i.e. not pay the mortgage). In this way the mortgage debt may be placed in one name. Alternatively, if the lender is not prepared to accept this then a position may arise where the ownership of the property is in one sole name, the mortgage debt remains in joint names and the occupying ex-spouse agrees to indemnify the other party against any mortgage debt (i.e. the spouse who retains the property agrees to cover the liability of the other spouse). This is quite normal as if any maintenance is maintained then the likelihood of the mortgage falling into arrears is unlikely. Professional help should be sort in this regard to ensure that all parties are aware of their obligations.
Postponed Sale - It may be that because of the situation, the sale of the property is postponed for a period. It may be that the house has gone down in value, it may be that there are children involved and it is in their best interests to stay in the home, in a settled environment. If this is the case, the courts may order that the sale is postponed until a given date in the future, or when the property value has recovered or children attain a certain age.
Postponed Sales or Transfers and Capital Gains Tax
Your principle place of residence (PPR) is normally exempt from capital gains tax. Likewise, transfers between spouses are free of capital gains tax. However, care should be exercised if deciding to postpone the sale of a property or the negotiations have taken some time or any transfer of ownership is made at a later date. If you have not lived at the property for over three years then it will no longer be classed as your PPR and any sale, disposal or transfer may be subject to capital gains tax. Capital Gains Tax is currently charged at your highest rate of income tax, less an annual gains allowance.
In addition, there is an Extra Statutory Concession D6 that may allow those who need to hold onto a property for longer. This will need to be agreed with your local inspector of taxes.
Please visit the Capital Gains Tax Advice pages for details on capital gains tax and your potential liabilities. You should seek professional assistance if this is a route you may consider.
Request advice from us for help with capital gains tax and your allowances.
Request legal advice or contact us for financial advice with capital gains tax and your allowances.