- In LKW v DD (2010) 13 HKCFAR 537, the Court of Final Appeal held that a wife is entitled to half of her spouse's assets, but this is not automatic.
- The court will consider whether a “clean break” can end one party's financial obligations.
- On divorce, the court can order a property to be sold, transferred to one spouse, or kept in the couple's joint names.
- Hong Kong legislation has no provision recognising the validity of prenuptial agreements, but Hong Kong courts will look at an agreement a couple signed before marriage.
Divorce has become more common among Hong Kong couples in recent years. Besides custody of the children, many people are concerned about the division of property.
Does one spouse's affair entitle the other to a bigger share? And how does the court treat a prenuptial agreement, if there is one?
Who owns what, and where each spouse will live
Who owns the money in a bank account, and how it is used, can lead to disputes.
| Account held in one spouse's sole name | Joint account | |
|---|---|---|
| On the face of it | Any money in the account belongs to that person | Any money in the account is owned jointly by both spouses |
| Unless | there is a contrary intention, or the other spouse contributed part of the money | there is a contrary intention (for example, a joint account opened only for convenience) |
Generally, though, property bought with money from the account belongs to the buyer.
So if the husband uses money from a joint account to buy shares or a property in his own name, those assets are, on the face of it, his.
Please note
- If the couple have pooled all their assets, the court may treat the joint account as shared property, even if the husband put more into it.
- If the couple have pooled all their assets, the court may also rule that what the husband bought with money from that account is owned equally by both.
Where each spouse will live
The court will try to make sure each spouse has somewhere to live. This matters most when there are children.
The court will also try to make sure the children have a secure home.
Not sure whom the money in an account belongs to?
Contact us to check your situation and the documents.
What share of the property is divided: is it always half and half?
In LKW v DD (2010) 13 HKCFAR 537, the Court of Final Appeal held that on divorce in Hong Kong a wife is entitled to half of her spouse's assets, an equal split, but this is not automatic.
When dividing property on divorce, the judge looks at both parties' assets and debts, and at each spouse's earning capacity now and in future.
The Family Court also considers the following factors in deciding maintenance and how to divide property:
- How long the marriage lasted
- Each spouse's contribution to the marriage
- What each person owned before the marriage
- A reasonable standard of living, and similar factors
In deciding each person's share, the Family Court looks at what each has put in, along with other factors:
- Money: the deposit on the home, legal fees, stamp duty and mortgage repayments
- Non-financial: giving up paid work to be a full-time mother
Maintenance or a “clean break”, and whether it is possible
A wife is usually entitled to a share of the jointly held property, and may also receive regular maintenance.
The court will also consider whether a “clean break” can end one party's financial obligations.
A “clean break” means dividing property and/or paying a capital sum once (in one payment or by instalments), so that both parties can:
- Leave the unhappy past behind and start a new life
- Avoid reliving the pain of the broken marriage, or the burden of litigation (such as chasing unpaid maintenance)
The basic reason for a lump-sum order is to meet the wife's reasonable needs and to recognise her contribution to the marriage, as a wife and/or as the children's mother.
If she took an active part in the family business, or gave it financial support, the lump sum may be higher than she asked for, to recognise that she helped to “earn” part of the family assets.
Please note
- The court will not make a lump-sum order unless the respondent has enough capital and paying it will not weaken his earning capacity.
Is a “clean break” possible?
Whether a “clean break” is possible depends on the financial resources of the paying party (usually the husband). Where the couple's relationship is bad, the court will arrange one if it can.
How much a clean break needs varies from case to case. It depends on how much maintenance the applicant (usually the wife) would expect to receive, and for how long.
The sum must be enough to cover the applicant's financial needs over that period.
If necessary, an accountant can work out the figure, taking into account factors including expected interest rates and inflation.
Please note
- This arrangement can be costly, and it can be affected if a party will not cooperate in providing useful information.
- Unnecessary accounting or professional services will not be used.
A “clean break”: what husband and wife should consider
When a former wife remarries, her ex-husband's duty to pay her maintenance ends automatically.
Please note
- If the former wife may remarry soon, it is unwise for a husband to pay a large sum or hand over property for a “clean break”, because she will not return it when she remarries.
On the other hand, a clean break has an advantage: it ends the former wife's financial dependence on him, and he can put the unhappy marriage behind him and start a new life.
What a wife should consider
For a wife, a clean break brings financial independence. She is free to use the money as she sees fit.
She also no longer carries the burden of litigation, such as chasing her husband for maintenance, or facing his application to the court to reduce maintenance because his circumstances have changed.
Please note
- If the sum turns out to be too little for her needs, or she spends or invests unwisely, she cannot go back to court for more from her husband.
- If her husband becomes wealthy after the divorce, she likewise cannot make a further claim.
Is a “clean break” right for your situation?
Contact us to ask about maintenance and how property is divided.
Who owns a business, and valuation disputes
Suppose the husband owns a business that has capital value and is his source of income. Its valuation can become a point of dispute.
If the business itself owns property or other costly assets or equipment, a qualified person, such as an accountant, can be appointed to value it.
If there is no plan to sell the business now or soon, its main value is the income it can produce. This matters even more if the husband will be paying maintenance to his wife and/or children.
If the business keeps running well, they will benefit too.
Valuations are disputed because each side's accountant often uses different methods and reaches very different results.
| Accountant appointed by the husband | Accountant appointed by the wife | |
|---|---|---|
| Valuation | May give a lower valuation | May give a more accurate valuation |
Please note
- If the two accountants cannot agree on a valuation, they may be called to give evidence in court, which is often expensive.
Dividing title to the home, and identifying a divorce property
If a couple cannot agree on who owns what when they apply for divorce, the court must decide, and it will rule under the Matrimonial Proceedings and Property Ordinance (Cap. 192).
How the property is held
How a property is held affects the court's decision, but do not assume that a property held in one person's sole name will escape division on divorce.
Please note
- The court treats all of the couple's assets, including bank deposits, property, shares and funds, as family assets and divides them on the principle of fairness.
- Even if a flat is in one name only, the other spouse may be awarded part of the interest in it by the court.
- Conversely, if a property is held in joint names, the final ruling may not give each person half the ownership.
How the Family Court deals with property on divorce
After balancing the factors on both sides, the court makes an order on the divorce property. Orders generally fall into three types:
- Sale: the court orders the couple to sell the flat. They agree between themselves how to divide the proceeds. If they cannot agree, the court divides them by looking at both parties' finances and contributions.
- Transfer: the court can also order one party to transfer their share of the property to the other.
- Joint ownership: the court rules that the couple keep holding the property jointly. They may sell only in specified circumstances, such as when one of them dies or remarries or when the children finish their education. The proceeds are then split equally, as the couple agree or the court decides.
Transfer
In many cases, if the wife is awarded custody of the children, the court may award her the home even if the husband was its sole owner, to protect the children's future standard of living.
But if the property is worth more than the wife's entitlement, the court may require her to pay the husband the difference. Because the transfer is made by court order, no stamp duty is payable by either side.
Please note
- When a flat with an outstanding mortgage is transferred to the other spouse, the mortgage must also be transferred, with the lender's consent. If the new owner fails the stress test, the bank may ask for an additional guarantor.
Identifying a divorce property
A property caught up in a divorce may be subject to a court injunction that restricts resale. A new buyer who wants to buy a property in matrimonial proceedings may sign a sale and purchase agreement and still be unable to get vacant possession.
Buyers should search the register to identify a property in matrimonial proceedings and weigh the risk.
Generally, when a property is involved in matrimonial proceedings, the “encumbrances” column on the Land Registry's register will show: “Certified True Copy of Notice of Intention to Proceed with An Application for Ancillary Relief”.
The following wording may also point to a divorce property:
- Divorce Petition
- Divorce order based on behaviour (Order: Divorce Behaviour)
- Deed of Partition
A mortgage may not be approved
A property the court orders to be transferred is transferred without payment. It can be treated as one kind of gift-deed property, for example where an owner transfers it to a spouse by deed of gift.
Please note
- As with any gift-deed property, it may be taken back if the transferor goes bankrupt, and a bank may refuse a mortgage application.
Transfers are hard
A property in matrimonial proceedings may be treated as a gift-deed property, which lowers its value. New buyers also worry that they will not get a high loan-to-value mortgage, so the new owner may find it harder to resell later.
Please note
- Dividing title on divorce is complicated. You need to state your wishes clearly to protect your interests.
- Prospective buyers should also understand the risks of a property in matrimonial proceedings, to avoid a bad bargain.
If someone else contributed to the purchase, does it affect how the court divides the property?
If a third party contributed money when the property was bought, that part is not included in the division of the couple's property.
For example, a couple buy a HK$5 million flat and the husband's mother pays HK$1 million of it. On divorce, the husband's mother will hold that amount, or a part interest in the property.
Please note
- If the other spouse sold, before the divorce, a property you had contributed to, you can claim back your loss. In one case a wife sold, without her husband's knowledge, a property she was paying for. The court held that the flat belonged to the husband and ruled the sale invalid.
How a prenuptial agreement affects the division of wealth
Hong Kong legislation has no provision recognising the validity of prenuptial agreements, but given changes in society and culture, Hong Kong courts will look at an agreement a couple signed before marriage.
The court has discretion to divide property and make maintenance arrangements according to a prenuptial agreement if:
- Both parties had enough time before the marriage to consider the terms
- The terms do not favour one side and lead to unfairness
- Each had a lawyer and disclosed their assets
Making a prenuptial or postnuptial agreement
In cases involving very large assets, especially the wealth of “super-rich family members” or second-generation heirs, this 50/50 rule has an important effect.
So if you want to protect family or personal wealth and avoid unexpected outcomes on divorce, a prenuptial agreement becomes very important.
Not sure how to deal with a divorce property?
Contact us to check how your property is held and your circumstances.
