Digest No. 1969
In 2001 the Law Commission recommended that the Joint Family Homes Act 1964 be repealed
and not be replaced
. The following is a brief description of the Law Commission’s report.
What the Act does
The Act (and its predecessors, particularly the Joint Family Homes Act 1950) enables a dwelling occupied as their home by a married couple and owned by either, or both of them, by a reasonably cheap and simple procedure, to be vested in the husband and wife as joint tenants
Benefits originally provided
The Act enabled the following to be obtained:
a substantial death duty saving;
a degree of protection against unsecured creditors;
the security for a spouse not already on the title (usually the wife) of being able, on becoming a co-owner, to thwart dispositions of the property;
the convenience of being able, as part of financial planning schemes (usually but not invariably tax driven), to vest their homes in both spouses without incurring stamp or gift duty; and
the saving of legal costs in the case of very small estates by making it possible to register title to the home in the surviving spouse by means of a survivorship transmission without the need to obtain, for that purpose, a formal grant of administration of the deceased spouse’s estate.
Now these advantages have largely disappeared. Death, Estate, Stamp and Gift duties are now all abolished. The Relationship Property Act 1976 confers on each partner a right to thwart dispositions of relationship property and provided a means of vesting the home in the names of both partners.
In 2001 the Law Commission believed that only two substantial advantages remaining were:
protection from creditors; and
minor advantages in relation to legal costs.
The Law Commission also noted the shift from formal legal marriage and, even in 2001, the marked decline in registrations (from 30,000 in 1974 to 1,509 in 2001)
Protection from creditors to and proposed general protection for all principal dwellings
In relation to protection from creditors, the Law Commission discussed the issue in detail but observed that registration as a joint family home did not often make a difference in the way in which the estates of bankrupts were disposed of.
But the Law Commission recommended that if there was to continue to be protection of homes against creditors, “would the simplest solution be to repeal the Joint Family Homes Act (and logic would suggest the Matrimonial Property Act protection also) and replace it with a blanket protection (up to the amount of the specified sum) of a bankrupt’s principal dwelling house, roughly analogous in effect to the protection of necessary tools of trade and necessary household furniture and effects to be found in the Insolvency Act 1967 section 52? This would preserve the protection that is the principal current raison d’être of the Joint Family Homes Act, avoid the problems of definition that would arise if the Joint Family Homes Act were to be extended to de facto relationships and remove the reproach of discrimination against single home-owners …”.
The Law Commission stated: “Such a proposal properly falls for consideration as part of the Ministry of Economic Development’s current review of insolvency law”.
That current review resulted in the Insolvency Act 2006 which does not include such a provison as recommended by the Law Commission
Law Commission did not recommend preservation of the Act
The Law Commission recommended that the Joint Family Homes Act 1964 not be preserved because:
any benefit that excludes sole owners was discriminatory [and, it may be added, that the benefit of the Act also excludes de facto partners];
the protection against creditors is, in any event, of limited;
there is a geographical inequity in relation to the specified sum (i.e. the value of the home protected is limited to a certain sum which applies throughout the country and does not take account of differences in property values – in some parts of the country a bankrupt is more likely to have the entire value of their house covered than in other regions);
current rate of registrations suggests an absence of any widespread belief by members of the public or their advisers of the utility of such protection (the Law Commission stated: “We have not overlooked the possibility that one cause of the fall in the number of registrations may be the drop in the marriage rate as described, … a factor that could be eliminated by preserving the statute but extending its protections to de facto partners, but there seems no reason to believe that such a law change would increase the rate of registrations sufficiently to invalidate the conclusion we have drawn”);
It is open to any individual who feels that he or she does have a particular reason to protect a home against creditors to use such other devices as the creation of a trust, which although more expensive than settlement, as a joint family home has the advantage of not involving any limit in value