What surprised me was to see that ordinarily 4 to 5% of owners are in default at any time with their rates.
This got me to thinking about what might happen to those who are about to split up, and paying the rates might be a struggle.
Here's a little guide on what to do...
If you have split up and you and your spouse own a property, then there are usually a number of critical bills that have to be paid. There are two keys to control the situation post-separation: not surprisingly, they are information and money. Information, as Benjamin Franklin put it so aptly, is power. More to the point - a lack of information is a lack of power.
People usually remember to pay the mortgage but forget about some of the other essentials that have to be paid. Some basics that have to be paid:
But what if your spouse is in the home and you don't know whether the mortgage is being paid or not? Assuming that you owe the debt too, the first thing that you need to do is to ensure that you get copies of the mortgage statements sent direct to you from the bank. Better yet, if you are able to access statements online, you will be getting current information, whenever you want. If you have a mortgage that has a substantial line of credit or redraw facility, you ought to get copies of your terms of account from the bank and immediate legal advice so that the money in the account is able to be protected.
It's one things for your ex's lawyers to say something like "the withdrawal of this money will be taken into account on property settlement". It's another to know that once it's gone, it's gone.
Check the statements to see if you and your spouse are ahead in payments. Making any payments immediately on separating can be extremely painful, and if there are substantial pre-payments, then that might things easier for a few months.
If you intend on separating to make substantial pre-payments on the mortgage - get legal advice from a family lawyer before you do so. You may find yourself later criticised for making the payment, or set yourself up on child support or spousal maintenance obligations. You may find that the bank treated the money differently to how you thought it might treat the money, and payments still have to be made.
If the mortgage is only in the name of your spouse, then you will need to get copies of the mortgage statements from them, or failing that from the bank. If in doubt, get legal advice.
Fairly obviously, if you default in payment of the mortgage, it is an act of default. This can impact on you getting credit in future. If payments are not made, there are legal steps that can be undertaken to fix the situation. This could include an order requiring your husband or wife to make the payments, or an order for sale.
If you are in default of payments, talk to the bank. Banks do not like throwing people out of their own homes. It makes them feel bad and generates terrible publicity. Most banks would rather that you sorted out your mess, but treated them with courtesy- keeping them up to date with developments and ensuring that they know that they will be paid.
If you are in default with your mortgage, get immediate legal advice from a family lawyer.
Home and contents insurance
It's essential that the insurance is kept up to date. There's no room for manoeuvre here- it just has to be done. After you have separated, don't just assume that it has been done. Some people are tempted to save money and not keep their property insured. If the policy is partly in your name, check that it's been paid and ensure that you get copies of statements.
If the worst comes and you discover that the property is uninsured- if the property is partly in your name- get a cover note immediately. This is just a case of phoning your broker or an insurance company and organising it over the phone.
If you discover that the property is uninsured, but it is not in your name- get immediate legal help.
Non-payment of the insurance will also constitute an act of default on your mortgage.
Local government rates
The same rules apply. The rates bills have to be paid. Make sure you are getting copies of the rates bills either sent directly by the council or indirectly from your ex.
If the rates bills are unpaid, then council usually levy interest. If the council sues you, there is no defence.
Non-payment of the rates bill is also an act of default on the mortgage.
If you are not in a position to pay the council, then there are usually means to defer payment. In Brisbane there is the formality of a Tribunal. With most small councils, it usually means calling them up and telling the person on the rates desk the problem you have. They will have heard it all before-
- "We've split up."
- "We're going through a property settlement."
- "I don't know how long it's going to take- the lawyers are writing to each other/it's in court. How long's a piece of string?"
- "Of course we'll pay when the property settlement is done. I'm not sure if there's going to be a buy out or a sale. Both of us want the home."
Most, but not all, councils are prepared to be patient, provided:
- they are treated with courtesy, and are kept up to date with developments. If you keep them in the dark, they are less likely to be courteous towards you.
- there is a clear commitment that they will be paid on completion of the property settlement.
- interest is paid.
Some councils will want payment each billings cycle or they will take action. Some councils do not charge interest.
It doesn't apply to everyone, but if it applies to you it also has to be paid.
Non-payment is an act of default on your mortgage.
Again make sure that you get copies of any assessments, and ensure that it is paid. Offices of State Revenue may be prepared to wait until the property settlement occurs, provided:
- you keep them advised of developments
- there is a clear commitment to pay on property settlement
- interest is payable