If like me, you came across the Netflix television series Grace & Frankie over the holiday period, chances are you’ll know the point in the show where a decision needs to be made about living arrangements. While their circumstances are somewhat unique, the question ‘who gets the holiday house?’ is one that is brought up in amongst a whole lot of humour.
Just as few people going through separation will find much humour in the situation, nor will there be a large number of people who can say they have a holiday house to consider when looking at the division of property. But in the real world the outcome is often the same regardless of whether it is a holiday home, an investment property or the family home.
Here’s why: In the end, it comes down to which party can afford to retain it.
How does a judge decide who gets the house?
There isn’t any law that requires a mother with the children to remain in the family home, although that often happens, particularly if she is the principal carer. However we see more and more families sharing equal time in an effort to minimise the impact on their children. It really is a matter of practicality.
If the separating couple cannot agree on who will remain in the family home, the final decision is rarely decided by a judge because practical realities eventually intervene. For example, if the house is worth $1.5 million and it has a $1 million mortgage then, if one party is unable to service that mortgage on their own post-divorce, then it is clear there is no possibility it can be retained by that party.
Sometimes though, if the case goes to Court, history can be relevant. For example, if both parties want the house and both can afford to retain it but the property was previously owned by a parent of one of the parties, a Judge may be swayed to keep the house within the family. But, in the case of a regular residential home where there is no agreement between the parties, Judges have the option of awarding it to one party or, on rare occasions, make a judgment saying it needs to be sold and both parties – if they wish to – can bid at auction to buy back the home.
What if the family home is in only one name?
When the family home is in one person’s name, this is typically because of one of two reasons:
- The property has been put in one person’s name for asset protection purposes (e.g. one party’s occupation has is at risk of litigation and they wish to avoid personal assets being available if that was to occur); or
- The property was bought by one of parties before the couple got together.
Like the earlier example of the home being held in the family as a potentially persuasive argument when in front of a Judge, similarly ownership prior to the commencement of the relationship can sway a judgment.
The holiday house
If there does happen to be a holiday house in the asset pool, often they are one of the first assets to be sold. When parties can afford to keep it but both parties wish to keep the property, in my experience these homes can be just as emotive an issue as who is going to keep the former matrimonial home. Usually because it holds so many memories for them and sometimes it’s believed that the house will be an appealing location for children and grandchildren to visit and spend time.
Often times though this outcome is not realised as children and grandchildren get older and have commitments of their own. The holiday house can then become an expensive property that is costly to keep and doesn’t serve the intended purpose any longer. Of course unless the holiday house becomes the principal place of residence, if it is sold down the track,any capital gains may be taxable.
Conflict can also occur prior to settlement if both parties are accessing the holiday house. There can be disagreements about who will stay at the holiday house and when. This is particularly difficult if one party has moved on and is in a new relationship.
So while Grace & Frankie may be enjoying life and pleased they kept the holiday house, in reality it can prove to be an asset that can become increasingly complicated.
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