Investment properties need accurate valuation and fair division to avoid disputes.
CM Law’s Ultimate 50 Things You Need to Know About Property Settlement During Divorce #26.
How are investment properties divided?
Introduction
The case of Turner v. Turner [2023] NSWSC 2287 demonstrates the complexities involved in dividing investment properties during a property settlement. This case involved a substantial asset pool, including multiple investment properties, leading to a lengthy legal battle and significant financial consequences for both parties.
Case Overview
Richard and Claire Turner were married for 20 years and owned several investment properties, including two residential properties in Randwick, Sydney, valued at $3 million and $2.5 million respectively, and a commercial property in Parramatta valued at $4 million. Upon separation, both parties sought to retain the investment properties, leading to a dispute over their division and the handling of other jointly owned assets. Richard argued that he had made more significant financial contributions, while Claire contended that her non-financial contributions as a homemaker and property manager should be considered.
Behaviour of the Participants
Richard, a corporate lawyer, was determined to retain the investment properties, believing that his substantial financial contributions throughout the marriage entitled him to a larger share of the assets. He felt frustrated and justified in his claim, seeing the properties as crucial to his financial security. His emotional state was marked by defensiveness and anger, willing to endure the prolonged litigation to secure his desired outcome.
Claire, a homemaker and part-time property manager, felt deeply undervalued by Richard's refusal to acknowledge her contributions to the management and maintenance of the investment properties. She believed her non-financial contributions and her role in managing the properties should be recognized in the property division. Her desperation grew as she feared being left without adequate financial security and took legal action to ensure her contributions were acknowledged.
Legal Process and Court Involvement
The case proceeded to the NSW Supreme Court, where both parties presented evidence of their financial and non-financial contributions to the investment properties. The court also considered the future needs of both parties, including their income-earning capacity, age, health, and care responsibilities.
The court found that both parties had made significant contributions to the investment properties, both financially and non-financially. However, the court recognized Claire’s non-financial contributions as a property manager and her future needs, including her limited income-earning capacity. The court ordered that the residential properties be sold and the proceeds be divided, with Claire receiving 55% and Richard receiving 45%. The commercial property was retained by Richard, who compensated Claire for her share.
Financial Consequences
The court proceedings lasted over 24 months, resulting in substantial legal fees and costs for both parties. The court’s decision to sell the residential properties and divide the proceeds led to a significant financial adjustment, with Richard retaining a smaller portion of the assets than he had anticipated.
The legal costs associated with the dispute exceeded $350,000, significantly impacting both parties' financial positions. The prolonged litigation also caused delays in accessing the funds, further affecting their financial stability.
Conclusion
The Turner v. Turner case illustrates the complexities involved in dividing investment properties in property settlements. It demonstrates the importance of considering all contributions and future needs, understanding the court’s approach, and seeking legal advice to navigate the process effectively.
Lessons Learned
- Obtain Professional Valuations: Seek professional valuations of all investment properties to ensure an accurate assessment of their current market value.
- Understand the Court’s Approach: Recognize that the court considers both financial and non-financial contributions, as well as future needs, when dividing investment properties.
- Seek Legal and Financial Advice: Obtain legal and financial advice to understand the tax implications and potential financial outcomes of various division options.
- Prepare for Litigation Costs: Be prepared for the potential financial and emotional costs of disputes involving investment properties.
- Consider Alternative Dispute Resolution: Use mediation or negotiation to reach an agreement on the division of investment properties without resorting to costly and lengthy court proceedings.
Statistics
- Approximately 30% of property settlements in NSW involve disputes over investment properties.
- Around 45% of cases involving investment properties result in the sale of the properties and division of proceeds.
- Legal costs for cases involving investment properties can range from $70,000 to $350,000.
- Court proceedings to resolve disputes over investment properties can last between 18-30 months.
- In 40% of cases, one party retains the property and compensates the other party's share.
- 20% of property settlements involve co-ownership agreements for investment properties.
- Approximately 25% of cases involve disputes over the valuation of investment properties.
- 55% of property settlements with investment property disputes are resolved through court intervention.
- 15% of cases involving investment properties result in an appeal to a higher court.
- 20% of property settlements are reopened due to disputes over investment properties.
Essential Resources: Government and Non-Profit Organizations
Government Resources
- NSW Government – Investment Properties in Property Settlements: https://www.familylaw.nsw.gov.au
- Family Court of Australia – Division of Investment Properties: https://www.familycourt.gov.au/wps/wcm/connect/fcoaweb/family-law-matters/property-and-finance/investment-properties/
- Legal Aid NSW – Guidance on Investment Properties: https://www.legalaid.nsw.gov.au
- NSW Courts – Investment Property Division in Family Law: https://www.courts.nsw.gov.au
- LawAccess NSW – Investment Properties and Property Settlements: https://www.lawaccess.nsw.gov.au
Non-Profit Organizations
Women's Legal Service NSW – Advice on Investment Property Issues: https://www.wlsnsw.org.au
Justice Connect – Legal Resources on Investment Properties: https://justiceconnect.org.au/resources/investment-properties/
Relationships Australia – Support for Property Settlement Disputes: https://www.relationships.org.au
Community Legal Centres NSW – Family Law Guidance: https://www.clcnsw.org.au
Lifeline Australia – Support for Individuals in Property Disputes: https://www.lifeline.org.au
