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    Property Settlement – What happens to property that has significantly increased in value over time?

    Jul 14, 2021 9:58:50 AM

    One of the most important steps in family law property settlements is identifying the net asset pool available for division between the parties. Generally, the most significant asset available for division between the parties is real property (i.e. the family home and/or investment property).

    For some time now, Australians have seen house prices grow at record rates. The fast-growing value of property in Australia means that property purchased by parties around the time of the commencement of their relationship, or during their relationship, has significantly increased in value due to market forces at the time that the parties separate.  

    The Full Court of the Family Court of Australia (Alstergren CJ, Ryan & Aldridge JJ) recently addressed this issue in Jabour v Jabour (2019) 59 Fam LR 475 (“Jabour”). The Full Court evaluated voluminous authority on the topic and provided guidance on the approach to be taken where property which is the subject of a property settlement has increased significantly in value due to market forces overtime.

    In Jabour, the husband owned part of Property A before he married the wife in 1991. There was no evidence before the Court as to the value of Property A at that time. The husband went on to own all of Property A by 2001 and it was presumed by the Court that the value of the property at that time was approximately $210,000. The wife described Property A as “those pieces of dirt on the side of the highway”. In 2010, the property was rezoned. At the time of the final hearing in 2018, Property A had significantly increased in value and was worth approximately $10,350,000.

    At first instance, the primary judge decided that the parties’ contributions were equal but for the husband’s significant contribution of bringing Property A into the relationship. Thus, the primary judge assessed the husband’s contributions at 66 per cent and the wife’s at 34 per cent.

    The wife’s challenge on appeal was successful. The Full Court set aside the primary judge’s Orders and re-exercised the discretion so that the husband’s contributions were assessed at 53 per cent and the wife’s at 47 per cent. In re-exercising the discretion, the Full Court explained that “whatever the value of the property at the commencement of the relationship, its significance has been largely lost given the myriad of contributions by each of the parties.”

    The main points to take away from Jabour are as follows:

    1. The Full Court was at pains to point out that the weight to be attached to an initial contribution must be assessed against the rubric of all the contributions, both financial and non-financial, made by the parties over the course of the relationship.
    2. The importance of the increase in value of a piece of property should not be overstated at the expense of the “myriad of contributions” that each of the parties have made during the course of the relationship. In other words, a property should not be quarantined so that other contributions are weighed against it, and instead it should be one of the myriad of contributions taken into account.
    3. The rapidly accelerated value of property due to rezoning or a lottery win is a mere windfall which neither party had a greater or lesser claim. As such, the authorities point to the increase in value as being a contribution by both parties (or neither of the parties). In Jabour, although the property was introduced by the husband, it was merely the springboard for the events which followed i.e. the rezoning.
    4. There does not need to be a relationship between contributions and what they have produced in terms of product or property. Put simply, there does not need to be a nexus between the contributions by the parties to the property which has increased in value.

    If you would like to discuss your family law property matters with one of our family lawyers, please contact us on (02) 9688 6023.

    This is not legal advice. 

    Isabella Urso

    Written by Isabella Urso