Marriages in community of property

 

Community of property is the primary and default matrimonial property system of South Africa.

If parties prefer to be married out of community of property, they must enter into an antenuptial contract before marriage. The Matrimonial Property Act 88 of 1984 (the Act) provides that the marriage will be subject to the accrual system unless the parties expressly exclude this system.

What is community of property?

When spouses marry in community of property, their separate estates merge into a single joint estate for the duration of the marriage. The spouses share everything – all their assets and all their debts. 

Assets 

The spouses become co-owners in undivided and indivisible half-shares of all the assets they respectively bring into the marriage and acquire during the marriage. 

Examples of assets that will not become joint assets: 

·         Testamentary bequests (inheritances) or donations made by a third party to a spouse subject to the express condition that the asset(s) are excluded from the joint estate of the spouses 

·         Property in which a spouse holds a limited or inalienable interest, such as a usufruct or a fideicommissum 

·         Engagement or wedding presents from a husband to his wife 

·         Delictual damages from third parties for non-patrimonial loss as provided for by section 18(a) of the Act (e.g., If one party is injured in an accident and received compensation from the Road Accident Fund) 

·         Delictual damages for personal injury inflicted by the other spouse as provided for by section 18(b) of the Act 

Liabilities 

Upon marriage, all spouses' debts, including their existing debts, become part of the joint estate. 

If the joint estate owes a creditor, it may sue the spouse who incurred the debt or sue both spouses jointly and severally (the spouses are joint debtors for the joint debts). Creditors of the spouses can look to the joint estate and the separate property of both spouses for recovery of a joint debt. 

Consent required

The spouses may have equal independent powers to control or manage the joint estate and incur debts that bind the joint estate. However, they have to obtain each other's consent for certain essential transactions, such as:

·         the alienation or burdening of immovable property

·         entering into a suretyship

·         purchasing a house

·         receiving credit under a credit agreement

·         selling shares or other assets held mainly as investments

·         withdrawing money from each other's bank accounts

·         instituting or defending legal proceedings and selling furniture or other household effects.

No consent needed

No consent is necessary for a spouse's transaction in the ordinary course of their profession, trade, or business. For instance, they could conclude a contract to alienate immovable property, receive credit, alienate shares, purchase land, bind Themselves as surety and institute or defend legal proceedings without spousal consent.

The effect of lack of consent 

Section 15(9) of the Act protects bona fide third parties who transact with a spouse without knowing that the necessary consent has not been obtained by deeming the transaction valid and concluded with the permission needed.

Section 16(2) of the Act provides that the court may suspend any power of the other spouse on the application of the prejudiced spouse in respect of the joint estate for a definite or indefinite period. The court must be satisfied that the order is necessary for the protection of the prejudiced spouse's interests in the joint estate. A more drastic remedy that would also be available to a prejudiced spouse is an application for the immediate division of the joint estate in section 20 of the Act.

What happens when the marriage ends in divorce? 

When a divorce ends a civil marriage or a civil union in community of property, the balance of the joint estate must be divided equally between the spouses after all liabilities are paid. 

In the case of customary marriages, the joint estate need not necessarily be divided equally between the parties. In terms of the decision of the Constitutional Court in Gumede v President of Republic of South Africa the court may redistribute assets equitably under section 8(4)(a) of the Recognition of Customary Marriages Act 120 of 1998.   

Section 7(1) of the Divorce Act 70 of 1979 provides that the parties may agree on the division of the joint estate in any way that suits them. In such a case, a signed settlement agreement will be part of the divorce order. 

Where the parties cannot agree on how to divide the joint estate, the divorce summons may ask for the appointment of a receiver or liquidator to make that decision.  The parties can also approach the court to appoint a receiver or liquidator, after the divorce.

 

 

Marriages out of community of property subject to the accrual system

 

 

 

These principles apply to a marriage out of community of property with accrual: 

1)    Both spouses have separate estates when they get married and don't share profits or losses during the marriage. They are basically in the same position as spouses who marry out of community of property with complete separation of property.

2)    Each spouse retains the estate they had before the marriage, and everything a spouse acquires during the subsistence of the marriage falls into their estate. Each spouse controls their estate. 

3)    The spouses are not liable for each other's debts except for being jointly and severally liable to third parties for debts incurred by either in respect of household necessities. 

4)    Accrual sharing occurs only at the dissolution of the marriage (on death or divorce) when the spouses (or their estates) benefit equally from the gains or profits made during the marriage. The accrual system is a type of postponed community of profit or a deferred community of gains. 

5)    Section 8(1) of the Matrimonial Property Act (the Act) protects a spouse whose rights are seriously prejudiced by the other spouse's conduct. In that case, a court may order the immediate division of the accrual on such basis as the court deems just. 

6)    In terms of section 4(1)(a) of the Act, the accrual in a spouse's estate must be determined by first deducting the net value of the spouse's estate at the commencement of the marriage (the net initial value) from the net value of their estates upon the dissolution of the marriage (the net end value). In terms of section 6(1) of the Act, a spouse may declare the net initial value of his or her estate in the antenuptial contract or in a separate statement either before or within six months of the wedding. If the net initial value was not so declared or a spouse's liabilities exceeded his or her assets at the commencement of the marriage, their net initial value is deemed nil. 

7)    Secondly, to determine the accrual in a spouse's estate, the value of certain excluded assets as listed in sections 4 and 5 of the Act must also be deducted from the net end value of the spouse's estate. Such excluded assets comprise the following: 

a)   Any non-patrimonial damages a spouse receives during the marriage 

b)   Assets specifically excluded from the antenuptial contract accrual and any inheritance, legacy, or donation that a spouse receives during the marriage. The Act provides that the proceeds of such assets and assets which replace such assets are also excluded

c)   Donations inter vivos between the spouses. 

Accrual sharing upon dissolution through divorce

Section 3(1) of the Act provides that the party whose estate shows the smaller accrual or no accrual upon divorce may claim from the other spouse an amount equal to half the difference between the accrual in the parties' respective estates. 

The accrual system only gives rise to a monetary claim and does not give the spouses rights concerning each other's property. 

A party's contingent right to share in the accrual of the other party's estate becomes perfected on the date of divorce.