Divorce and Ownership of Overseas Property

Owning a holiday home, investment property or land abroad can add another layer to a divorce. It does not necessarily mean that the case will become contentious or end up in Court, but questions about valuation, tax, local ownership rules and enforcement need to be identified early.

The important point is that an overseas property should not be treated as separate from the rest of the financial picture simply because it is in another country. A sensible settlement looks at a couple’s resources as a whole and asks how they can be arranged fairly and practically.

Is getting a divorce more complicated if you own property overseas?

Potentially, yes. The divorce application itself may be straightforward, but resolving the finances can take more work. In financial proceedings in England and Wales, both spouses are expected to give full and frank disclosure of their worldwide assets. That includes overseas property, whether it is owned in one name, jointly, through a company or with another family member.

The property may need to be valued by a suitably qualified local surveyor. Title documents may require translation. There may also be mortgages, tenants, maintenance charges, planning restrictions or tax liabilities to establish. Exchange-rate movements can alter the sterling value while negotiations are taking place.

An English Court can take overseas property into account when deciding a fair settlement. The more difficult question can be whether, and how, an English order will be recognised or implemented in the country where the property is situated. Sometimes the most practical solution is for one spouse to retain the overseas property while the other receives more of the UK-based assets.

Does the country make a difference?

Yes. Property law is local. The country in which the property is located will determine matters such as legal title, registration, sale formalities and the steps needed to transfer ownership. It may also affect whether an English financial order can be enforced directly or whether separate local proceedings or documents are required.

Tax treatment can vary considerably. A sale or transfer may trigger local capital gains tax, transfer tax, notarial fees or other charges. UK tax may also be relevant, depending on residence, ownership and the transaction proposed. Advice from a lawyer and tax adviser in the relevant country may therefore be needed alongside advice in England and Wales.

Does it matter how long you have owned the property?

It can. A property bought during the marriage with joint resources is likely to be treated differently from one owned before the relationship or received by inheritance or gift. However, the label attached to an asset is not the end of the matter.

How the property has been used may be just as important as when it was acquired. If it became a family home, was improved with joint money, or was treated as a shared asset over many years, that history is relevant. Even where an asset has a non-matrimonial origin, the Court’s first concern will often be whether the reasonable needs of both spouses and any children can be met. In a case where the available resources are limited, an overseas property may need to be used to meet those needs.

What if one spouse lives there, or plans to?

Occupation does not by itself decide ownership or remove the property from consideration. It does, however, affect the practical options.

If one spouse already lives in the property, questions may arise about their housing need, the other spouse’s access, mortgage and running costs, and whether a sale is realistic. If a move is only proposed, the plan should be tested carefully. The person hoping to keep the property may need to show that they can meet the mortgage, taxes and upkeep and, if appropriate, release the other spouse from any borrowing or ownership obligations.

Where children may move abroad, separate legal issues arise. A parent should not assume that an agreement about the property also gives permission to relocate a child. Specialist advice should be sought before arrangements are made.

What else needs to be considered?

• Jurisdiction: if either spouse has links with more than one country, advice may be needed urgently about where divorce and financial proceedings can be started. The outcome and available orders may differ.
• Legal and beneficial ownership: the registered owner may not be the only person with an interest. Trusts, companies, relatives and informal contributions should be identified.
• Value and liquidity: a paper valuation is not the same as the amount available after mortgage redemption, local tax and sale costs. Some markets are slow or restricted.
• Income and outgoings: rent, holiday letting income, service charges, insurance, repairs and local taxes all form part of the picture.
• Currency: the settlement should say how exchange rates will be dealt with and who bears the risk of a significant movement before sale or transfer.
• Enforcement: careful drafting and local advice may be needed so that the agreed outcome can actually be implemented abroad.

Full disclosure is essential. Trying to leave out an overseas asset is likely to increase delay and cost and may lead to penalties or an order being reconsidered later.

What can you do before starting divorce proceedings?

Good preparation can make a substantial difference. Before making major decisions, gather the documents that explain the property and how it has been treated. These may include:

• the purchase contract, title record and any declaration of ownership
• mortgage statements and details of any secured or family loans
• evidence of the purchase funds and later improvements
• recent valuations, rental accounts and tax returns
• details of local taxes, insurance, service charges and likely sale costs
• any pre-nuptial, post-nuptial or separation agreement.

Obtain advice before transferring the property, changing the title, taking on more borrowing or putting it on the market. A step that appears helpful in one country may create tax, enforcement or disclosure problems in another.

If communication is possible, agree neutral arrangements for the short term: who will occupy the property, who will pay the bills, whether it may be let, and how urgent repairs will be approved. Keep records. Early agreement on a joint valuer and the basis of valuation can avoid duplicated expense.

How can Fraser Dawbarns help?

At Fraser Dawbarns, our Family Law team can help you understand how an overseas property fits into the wider financial settlement. We can advise on disclosure, likely outcomes and the options for sale, transfer or offsetting the property against other assets.

Where specialist input is needed, we can work with appropriately qualified lawyers, valuers and tax advisers in the relevant country. Our aim will be to identify problems early, keep negotiations focused and help you reach an arrangement which is both fair and capable of being put into effect.

Where possible, we will help you resolve matters by agreement, including through negotiation or mediation, and turn that agreement into a binding financial order. If Court proceedings are necessary, we can guide you through the process and protect your position.

To discuss your circumstances, contact a member of the Fraser Dawbarns Family Law team.

This article provides general information only and is not intended to constitute legal or tax advice. The law and procedure will depend on the countries involved and your individual circumstances. Always seek advice specific to your situation before taking action.

How To Contact Us:

To contact a member of our team, you can fill in our online enquiry form, email info@fraserdawbarns.com, or call your nearest office below. If you’d like to speak to a member of our team at one of our offices across Norfolk and Cambridgeshire, visit our offices page.

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This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances. Fraser Dawbarns LLP is always happy to provide such advice.