Residential property
13 Dec 2019 News

Family law implications of building ‘Grand Designs’ on legacy land

As fans of Kevin McLeod will know, self-building gives you the opportunity to design a one-off family home that ticks all the boxes: design, living requirements and, most importantly, location. For some couples that means waiting years for the perfect plot to come on the market. For others, particularly in the farming community, it involves building on family land acquired by one party either by inheritance or gift. The build will likely almost consume all of their savings. Unfortunately for some couples, the dream home they build will remain intact when their marriage does not, leading them to the difficult task of disentangling and dividing their assets.

For farmers and rural business owners this presents special challenges. The basic starting point in all divorce cases is that there should be a fair sharing of the net value of the "matrimonial property". Matrimonial property is all assets and liabilities (1) acquired by either spouse (other than by way of gift or inheritance) from the date of the marriage until the date of separation or (2) before the marriage for use by them as a family home. Accordingly, the first task is to identify which assets fall within the scope of that definition and then to ascertain their value at the date of separation.

On the face of it that sounds a relatively straightforward task, but what if the couple’s dream home was built on land which was owned by one spouse prior to the marriage or on land which was gifted to or inherited by one spouse during the marriage? How is the land and the home treated on divorce? Is either or both matrimonial property? It was this conundrum which came before the court in the recent case of Grant v Grant [2018] SAC (Civ) 4.

In that case, the husband acquired land prior to marriage. He and his wife then built a kit house on the land before they got married with the intention that they would live there together as a family. The parties then got married, lived in the house as a family with their children and later separated.

If the question was put to a property lawyer, their answer would likely be that the house accedes to (becomes part of) the land and since the land is not matrimonial property, neither is the house. However in Grant v Grant the Court took a very different approach. It said:
1. The house and the land on which it was built should be treated as one single item of property, rather than individual assets;
2. That single asset is ‘acquired’ on completion of the build of the house; and
3. As the property was completed prior to marriage but, critically, intended to be (and did become) the parties’ family home, the new home and the underlying land were matrimonial property.

On that logic, it follows that any new home built on non-matrimonial land (i.e. land owned pre-marriage or acquired by gift or inheritance) either during the marriage or prior to marriage for use as a family home will convert the value of the land it sits on into matrimonial property.

Perhaps a controversial decision, this case has created a number of uncertainties. For example, what if the home was built on a section of land which forms part of a large number of acres owned before the marriage. Will it only be the land directly on which the house is built that is matrimonial property or does the whole acreage convert? If the latter, does that really achieve the fairness which the law sets out to achieve? Would the outcome be different if the property erected was an inhabitable outbuilding as opposed to a family home? Would the outbuilding and underlying land remain non-matrimonial property and the husband’s to keep on divorce? What if the new build was not the main family home but a second home or perhaps a holiday let?

Whether the Courts follow this approach in future cases remains to be seen but I expect a similar question to arise in the not too distant future. What is clear, is that specialist family law advice should be taken before embarking on any Grand Designs project involving pre-marital, gifted or inherited land if there is any desire to protect it from exposure on divorce.

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