By Anke Olivier-Kok, Associate Attorney at Adams and Adams
When the bonds of marriage are declared irretrievably broken down, there is a myriad of administrative issues that need to be resolved. One of these issues relate to immovable property that is owned in the joint names of both parties to the dissolved marriage. And even more so, when there is a mortgage bond registered over the property.
Determining how to deal with joint ownership and joint liability under a mortgage bond upon divorce is largely dependent on the provisions of the divorce order and, where applicable, the accompanying settlement agreement and whether the couple was married in or out of community of property.
Married in community of property
By operation of law, each spouse will be entitled to one half share in the property. Typically, however, the divorce order and/or settlement agreement will determine that one of the parties is awarded full ownership of the entire property. The party acquiring full ownership may apply to the Registrar of Deeds to endorse the existing title deed to the effect that he or she is now the sole owner of the property. No formal transfer is prescribed.
Married out of community of property
By virtue of their separate estates, the parties will already be co-owners of the property upon divorce. Once divorced, former spouses however rarely choose to remain co-owners of the property and typically the divorce order and/or settlement agreement will provide for one party to acquire the other party’s share and become owner of the entire property. Transfer of the share is effected by way of a formal deed of transfer and not merely by an application to the Registrar of Deeds.
Dealing with the mortgage bond
When there is a pre-existing mortgage bond over the property, both of the former spouses are co-mortgagors and still equally liable to the bank for the full debt amount under the bond. The parties will consequently have the following options:
- If the loan amount has been paid up, the bond can be cancelled; or
- If the bond cannot be cancelled due the fact that there is still debt under the existing home loan, the party acquiring full ownership of the property will need to approach the bank with a loan application in terms of which he or she applies to be substituted as the only mortgagor under the existing bond and thereby assume full liability for the entire debt amount remaining on the bond. If the bank is satisfied that its client can afford the sole financial responsibility of repaying the bond, it will consent to the removal of the forfeiting party’s name and liability from the mortgage bond.
In practice and irrespective of having been married in or out of community of property, the party who has acquired the other party’s share will typically, and by virtue of the divorce order, need to compensate the forfeiting party for his or her share. Often the acquiring party will bring an additional loan application requesting the bank to provide the necessary finance for this “buy out” transaction. The bank will usually require that a second mortgage bond be registered over the property in order to secure the further debt.
Getting divorced? Feel free to contact our team of Property Law experts for more information and assistance.