Family/Property/Contracting Out Agreement

Mr J came to us for advice with regard to a somewhat bizarre situation in his marriage.  He and his wife had been married for some years and had older teenage children.  They had sold their previous home and acquired a replacement more expensive home some 8 years before.  To do that they had taken bridging finance for a short time.  The mortgage to the bank remained on the title.  But as far as our client knew throughout the last eight years there was no mortgage balance owing to the bank. 

Our client had left all of the financial matters to his wife and had relied on her to look after daily household spending in virtually every respect.  Over the years he had not even opened a bank statement.  He had left all of this to his spouse.

One day he did open a bank statement to find that he and his wife owed the bank $350,000!  What had transpired was that the wife had used credit cards to build up a credit card debt on each both in her own name and also in Mr J's name.  This had been done without his knowledge and without his consent.  She had then gone to the bank to obtain finance to be secured by the mortgage and had persuaded the bank to let her take the loan contracts away to be signed by her and her husband.  In fact the husband had never seen the documents and she had signed for him.  She had done this about six times!

Our advice to Mr J was that he should endeavour to obtain a Contracting Out Agreement under the Property (Relationships) Act signed by him and the wife to protect his interest in the home by requiring her to acknowledge that most, if not all, of the debt that had been built up in the way described was her own debt and that his notional half share of the equity in the property was still his.  Such an Agreement was drafted by us and signed by our client and within two days was back signed by the spouse.  This then enabled them to regularise their financial arrangements with the bank and hopefully move on to a better understanding in their relationship.  At least our client was protected for the future.