What Happens To The Property After A Divorce?

Though divorce is all too common these days, there are many Malaysians who are still caught by surprise when they find that they won't be able to settle for 50/50. We cover the possible scenarios and what you can do about each.
divorce in malaysia, divorce malaysia, joint ownership, property after divorce

The modern-day fairytale for young Malaysians doesn’t involve Prince Charming and poisoned apples.

It’s achieving financial stability, finding the right soulmate, then settling down together in a home of your own.

But all that bliss can come to a screeching halt when the marriage collapses.

Though divorce is all too common these days, many newlywed homebuyers still opt for the joint ownership route when buying a property, be it for living or investment purposes.

Now, if you and your partner are faced with the very real nightmare of divorce, what happens to the property (or properties) which you own together? Do you automatically get 50%?

What if the property was under your name alone, do you get to keep it all?

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

 

First, Is The Property Under A Joint Ownership?

You see, there’s sole ownership, and then there’s joint ownership:

Sole Ownership

(or single ownership) is when the land title is under your name, and your name only.

The property, loans and all the legal documents that come with it are signed under your name and you own 100% of the property. Simple enough, right?

Joint Ownership

On the other hand, is when two or more companies or individuals (not necessarily a romantic partner) share equal ownership of the property, with equal shares and interest in the property.

However...because Malaysia practices tenancy in common, unequal percentages can be assigned upon agreement between both parties.

 

Joint ownership in Malaysia actually falls under four categories – where each category has its own pros and cons, as explained below. So you'd need to see which category you belong to.

PropertyGuru Tip
All joint ownerships have one major risk involved: if one of the owners faces financial difficulties, the other owner will be put in a difficult place as well! Ahem... the credit score for example.

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

1) Married Couples

Pros: By pooling together their total income, there is the potential for a higher margin of financing for their home loan, as well as the possibility of a longer tenure if they’re still young.

Cons: Need we mention more? The biggest risk here is the relationship itself. But there’s another downside as well: both joint owners may lose their second chance to exercise RPGT exemption.

2) Unmarried Couples

Pros: All the more reason to tie your partner down for life. A more economically efficient arrangement, as living expenses and property taxes can be shared equally.

Cons: Compared to married couples, unmarried couples face more difficulty during home loan approval procedures. Inheritance of the property could get tricky too, as there aren’t many laws that protect unmarried couples.

3) Friends Or Investment Partners

Pros: Lower entry cost, and easier to set clearer terms in the agreements if there are no romantic ties involved.

Cons: Unless the intention of both owners is purely commercial, there’s a higher risk of falling out with a friend since there’s no relational commitment - this results in lots of tricky, tricky implications.

4) Family Members

Pros: Strong ties between family members means less risk of complications, and easier succession of the property in the future.

Cons: Greater risk of affecting family bonds due to issues regarding the shared property.

 

Next, What Happens To The Property If There Really Is A Divorce?

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

With your marriage on the rocks, you may have no choice but to turn to divorce, which can be a messy and painful thing. Even messier when there’s kids, land and law involved.

There are two ways to go about it. In Malaysia, married couples have the right to decide for themselves who gets what. They can first talk it out, and who knows?

Maybe a peaceful compromise can be achieved! Below are two methods that married couples usually opt for when property is involved:

  • Clear the loan by selling the property. The proceeds can then be divided among both owners as they both see fit.
  • One owner can choose to buy over their partner’s share. Don’t worry, the property can then be refinanced according to the owner’s capability!

 

But If A Peaceful Compromise Can't Be Reached, The Law Will Need To Get Involved...

If only it was as easy as sitting down and giving out portions. More often than not, both parties will have a lot of disagreements in terms of dividing their assets due to conflicting views.

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

You may be thinking that since the property is under joint ownership, the law will state that both of you will automatically get 50/50 of the property’s shares.

Too bad that scenario may not necessarily be true. It depends on the type of property too!

 

Wait, What Does The Type Of Property Have Anything To Do With This?

When we say "type", we don’t mean serviced apartments, semi-D’s and condominiums (which by the way, if you still can’t differentiate between - read this!)

Malaysian law, or in particular, Section 76(1) of the Law Reform (Marriage and Divorce) Act 1976divides property into three types for the purpose of divorce.

  • Matrimonial property
  • Non-matrimonial property
  • Property acquired before marriage

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

Matrimonial properties are those which were bought through the combined effort of both parties. Say, if the couple took up a joint loan and bought a property under joint ownership.

Non-matrimonial properties are properties which were acquired by only one party. In other words, only under one party’s name (sole ownership).

Property acquired before marriage is a little rarer, but basically means property bought by either party before marriage.

 

But Did You Know Properties Under Your Name Alone Can Still Be Deemed Matrimonial Property?

It’s not as black and white as that though. The law hardly is.

See, non-matrimonial properties and properties acquired before marriage can BOTH be deemed as 'matrimonial' if the court decides to interpret it as such!

In the case of non-matrimonial properties (remember: sole ownership of one party only), if for example the property is under the wife’s name and her name alone, the husband may still be able to get a percentage of the shares!

And even if the property was bought purely with the wife’s own hard-earned cash before she even met the husband, the court may also deem it as a matrimonial property if it was substantially improved on during the marriage.

Say, if they both shared renovation costs.

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

So basically, it all boils down to how the court sees it. These are the three things they will mainly take into account.

  • Contributions by both parties, either in terms of money, assets or taking care of the family.
  • Debts of a spouse involved in their joint benefit.
  • The needs of any minor children under 18 years of age.

 

So, Play It Safe, And Get Everything Written Down!

Just like how your Sales and Purchase Agreement (SPA) protects you from your seller/buyer scamming you out of your cash. 

Co-Ownership Agreement can safeguard the rights of both parties involved in the joint purchase of a property.

No matter how rosy your relationship may seem with your partner at the moment, it’s still wise to get a sound Co-Ownership Agreement in place to help better resolve disputes if they were to arise in the future.

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

The rights, responsibilities and obligations of both parties need to be clearly laid out to prevent any unpleasant shocks down the road.

Most importantly would be the exit strategy for scenarios such as a sudden death or financial hardship.

 

But... How Much Shares Would I Actually Get After A Divorce?

When it comes to property division, there really isn’t a concrete answer. Because marriage and family aren’t set in stone either! Every family is unique, and so is every case.

But essentially, if you and your ex-partner manage to achieve a consensus on who gets how much, then it will be as agreed between the two of you.

However, if the case has to be brought to court, the court will decide on whatever they deem suitable. If you’re lucky, you might just end up with the ideal 50/50 split!

divorce in malaysia, divorce malaysia, joint ownership, property after divorce

PropertyGuru Tip
Remember, always be wary of entering contracts with people - even those you hold dearest. People change, contracts do not.

Who knows? Be it sole ownership or with that special someone, you might still be searching around for that perfect property.

Use this home loan solution to find out exactly how much you can borrow from a bank, and be matched with the right homes you can afford!

Read Next

Get expert advice for every question you can think of!

Explore AskGuru and gain exclusive access to thousands of answers from our expert and agent community. 💬⭐👍

Feedback