My spouse is to transfer the matrimonial property in our joint names to me.
Who is responsible for the ongoing liabilities when the transfer has not yet been effected?
We often have clients sharing with us that they are facing additional financial stresses as a result of the divorce proceedings.
A possible financial strain on parties’ can be from the payment of ongoing liabilities of the matrimonial property after a Court Order has been made.
For example, many of our clients will be in a situation where the Court has ordered a transfer of the matrimonial property initially in the parties’ joint names to a spouse’s sole name.
The next question we often get would be while the transfer of the matrimonial property has yet to be affected, who is responsible for the ongoing liabilities?
In a recent Court of Appeal case, the Court laid out the guiding principles relating to situations involving ongoing liabilities pending the transfer of the matrimonial property.
Ongoing liabilities can be subdivided into two categories, namely mortgage payments and other payments (e.g property tax payments).
- Servicing the outstanding mortgage payment will increase the net value of the property and will solely benefit the eventual owner.
- The spouse who will be the eventual owner of the property should bear the mortgage payments.
Other payments such as property tax payments
- Property tax payments are taxes on ownership of the property and have no effect on the net value of the property.
- The legal owners of the property irrespective of who will be the eventual owner should bear the property tax payments.
Displacement of General Principles
Notwithstanding the above, these principles can be displaced in appropriate circumstances. Our Divorce lawyers can advise you further about the appropriate circumstances.
The Court also provided further guidance in cases where a party in a divorce is given the option of buying over the other party’s share of the matrimonial property.
- First, the Court is to identify the different types of payments involved.
- Next, the Court will determine whether the principles governing the mortgage payments and other payments should apply or whether they can be displaced.
Important to Note
In summary, the Court of Appeal case illustrates the general principle that mortgage payments must be borne by the eventual owner of the property, and property tax payments must be borne by the legal owners of the matrimonial property. It is worth noting that these general principles can be displaced in appropriate circumstances.