Is it legal, moral, advisable to transfer your house to your spouse?

This issue has come up a few times recently. I would like to clarify it for the ordinary individual rather than having a discussion about very large property developers and what NAMA should and should not do.

John and Mary own a house together worth €600k which is mortgage free.
John has an investment property worth €600k but has a mortgage attaching to it of €2m. There is no cross charge on the family home.

In all senses of the word John is insolvent. He is not able to meet his mortgage repayments as they come due. His liabilities comfortably exceed his assets.

He is worried that the bank will tell him to sell the house and contribute his share, €300k to reduce the loan. Before this happens, he wants to transfer the property to his wife's sole name.

Is this legal?
No. It's not legal, according to this article by [broken link removed]

Legislation is in place to combat such transfers where the intention is to defraud creditors or others. The Land and Conveyancing Law Reform Act 2009 provides that any transfer of property made with the intention of defrauding a creditor or other person is voidable by any person who is prejudiced by it. This provision is not limited to land and also encompasses personal property. A person seeking to rely on this legislation must prove that the transfer was intended to defraud a creditor or other person.

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There are even stronger powers in the NAMA act for NAMA to deal with such transfers.

Can the transfer be reversed?
Under the above Act, it can be reversed.
If John is declared bankrupt, any tranfer within the previous 2 years is automatically reversed. Any transfer within the previous 5 years is subject to challenge by the High Court.

So John's strategy is to do the transfer immediately and hope to last the two years.

In practice, the bank is unlikely to go to the cost of making him bankrupt, so this might be academic.

Is this moral?
I am not in this position, so I can afford to be moral about this. In my opinion, this is not the "right" thing to do. A person should pay their debts or come to a settlement with their lender.

A few people have justified this on the grounds that the big developers are doing it or that the banks are screwing people or that we have bailed out the banks.

Is it advisable?
Even if it's legal and moral, I don't think it's a good idea.

In practice, are the banks seeking to put people out of their family homes to settle business debts? I don't think that they are, but I might be wrong on this.

John's best hope of recovery is to reach a settlement with the bank. If the bank sees this transfer, they will think that John is not acting in good faith.

This might be a naive view. The banks will not respect people who have acted in good faith.

In my view, it would be a perfectly legitimate practice for someone who is solvent but worried about the future to make such a transfer.

Is the family home not protected against this scenario?

Is this moral?


Morality is all about context.

Would this decision be solely for the benefit of the businessman? No.

It is reasonable for someone who had purchased his house and could afford his mortgage to seek to protect his family home from repossession due to a change in business circumstances? Yes.

No.

callybags said:

Is the family home not protected against this scenario?

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I don't think so. As I understand it, the Family Home Protection Act protects the wife's interest in the home if she is not actually named on the deeds.

Is it really reasonable to protect family home from repossession due to a change in business circumsatnces ?

It is too simplistic to give a blanket "yes" or "no". Surely, it depends on circumstances as ONQ rightly sates.

YES, if it is a genuine case of a guy who has a seperate legal entity -ltd company etc - which went bust. The individual is protected from the company's creditors (-unless there was criminality,including gross negligence and similarwhilst running the business)

But even if one traded under one's own name -including buying investment properties- and if has been honest and diligent then ,surely it is more "moral" to protect one's wife and children from eviction rather than ensuring the Immoral Bank of Greed Ltd. gets its pound of flesh.

NO , it is not "moral" for Mr Scuzzball to "protect" his five million euro mansion bought from the proceeds of a business that has cost creditors,including the people of Ireland , untold amounts of money and misery.
Even if his business was a seperate legal entity then it is still moral to take the home from him, as long as there was reasonably housing available for his family.

Repossessing a semi-D from a genuinely broke guy whose business failed is so different from the case of certain developers presently in the news.

The law has to follow a certain line and making moral judgements is not as available to judges as they are to we posters here.

Reminds me of the old joke

Q. Who are the super rich?
A. Anybody who earns more than me.