Property division in divorce

Every marriage and divorce is different. There are no hard and fast rules regarding the division of assets in divorce. If you’re getting divorced or dissolving your registered civil partnership, one of your biggest financial decisions could be what to do with the family home.

In an ideal scenario, separating partners would amicably agree to divide their matrimonial property after divorce. However, reality often paints a different picture. For every relationship that parts ways cordially, there are numerous others where tension and conflict prevail. This can result in the divorce process dragging out far longer than necessary.

LEGALITIES OF HOMEOWNERSHIP IN DIVORCE

The decision on who retains the home is typically left to the divorcing couple. If they fail to reach an agreement, the matter falls into the hands of a judge. The legal ownership of the property only marginally influences this decision.

For instance, if a husband owns a property and the wife’s name doesn’t appear on the title, it doesn’t automatically grant the husband exclusive rights to sell the property. The wife, by virtue of residing in the home, holds some interest in the property. The judge determines the value attributed to her.

INTRICACIES OF PROPERTY DIVISION

The division of property isn’t as straightforward as splitting it down the middle unless the divorcing couple agrees. If the divorce is contentious, solicitors may attempt to mediate a resolution between the parties. They will provide their professional opinion on the division of the property.

As expected, both solicitors will advocate for their respective clients. However, in most cases, they should be able to negotiate a fair outcome. The situation becomes significantly more complicated if an agreement cannot be reached.

WHEN THE COURT STEPS IN

If the divorcing parties can’t agree on the division of the property, the case will proceed to court. An expert judge will assess the situation and issue a ‘financial remedy order’ – a definitive ruling on who owns what percentage of the property.

Contrary to popular belief, the division of marital property isn’t necessarily a 50/50 split or awarded to the person whose name is on the mortgage. In the eyes of the law, multiple individuals may hold an interest in the home, even if their name isn’t on the deed.

KEY FACTORS UNDER SCRUTINY

When judges deliberate on the division of the marital home during a divorce, several key factors come under scrutiny. These include the duration of the marriage, whether there are any children involved, the name(s) on the property deeds or mortgage agreement, and who has been servicing the mortgage. The age of both spouses is also a crucial consideration.

Having considered these factors, the judge will then make an official ruling concerning the ownership share of the property and propose what should be done with the property.

REFINANCING THE EXISTING MORTGAGE

Dealing with a joint mortgage can be particularly challenging when navigating the complexities of divorce. If appropriate, the cleanest solution may be to refinance the existing mortgage and leave only one spouse’s name on the loan. However, in some cases, both parties might decide to keep their names on the mortgage and continue making payments as they did while married.

This arrangement must be clearly spelt out in the divorce documents. It’s important to note that even if one party quitclaims the deed, both divorcees may remain on the mortgage. If one party decides to stop paying, the other is legally obligated to continue payments.

UNLOCKING THE RETAINED EQUITY

Remortgaging your property offers an opportunity to unlock the retained equity, enabling you to buy out your ex-spouse’s share from the joint mortgage. This process entails replacing the existing mortgage with a new one which doesn’t bear your ex-partner’s name. Depending on your circumstances, you may choose to remortgage solely in your name or include another individual on the new mortgage as a replacement for your ex.

Eligibility for remortgaging is determined by factors like income level, creditworthiness and age – similar to the original mortgage application process. However, it’s essential to remember that your new mortgage might have different conditions from the previous one. These could include variations in rates, mortgage terms and facilities.

FINANCIAL CAPABILITIES AND LONG-TERM GOALS

Moreover, using the equity to purchase your ex-spouse’s portion might escalate your mortgage costs. Therefore, careful consideration of these factors is crucial to ensure the decision aligns with your financial capabilities and long-term goals. An alternative option for dealing with a joint mortgage in the event of a separation or divorce is to sell the house and divide the profits.

Another possibility is transferring the joint mortgage to one person. Both options require careful consideration and should ideally be discussed with a qualified financial professional or legal counsel.

Remember, failing to meet monthly payments could lead to the repossession of the property and negatively affect both parties’ credit scores. It’s crucial that both parties communicate openly and honestly about their financial capabilities and intentions to ensure an equitable solution is reached.

FORCED SALE OR SHARED OWNERSHIP

The judge could mandate the sale of the property or propose that one spouse remain in the home and make a lump sum payment to the other party. The entire process to secure a ‘financial remedy order’ typically spans about a year. Therefore, it’s paramount for both parties to reach some form of agreement prior to this.

PRIORITISING THE CHILDREN’S INTEREST

The law mandates that children should always take precedence in divorce proceedings. The impact of parents separating is already significant; the court would not want to exacerbate this by forcing the children to change schools or homes unless absolutely necessary.

In most divorce cases, the primary caregiver for the child (i.e., the spouse who has custody most of the time) is allowed to stay in the property with the children until the youngest child turns 18. A property sale might be enforced at this point, but this isn’t always a given. If children are part of the marriage, this is likely to be the court’s decision when a ‘financial remedy order’ is issued.

SHARED CONTROL OF THE PROPERTY POST-DIVORCE

However, this doesn’t mean that the spouse remaining in the house has complete control over the property. The non-resident party will still hold a stake in it. If their name is on the mortgage agreement, they are obligated to continue making their mortgage contributions. If a decision is made to sell the property, both parties’ consent would be required.

Another consideration is that properties sold in the event of divorce provide a fresh start for everyone involved, offer each party their own home and minimise contact between the divorcing parties.

DEFERRAL OF THE PROPERTY SALE UNTIL A FUTURE DATE

In the context of a divorce, there are instances where the immediate sale of the property may not serve the best interests of one party involved. In such circumstances, the courts can provide a solution in the form of a Mesher Order. This order mandates the deferral of the property sale (or any other asset) until a future date.

Mesher Orders are frequently issued when children are still residing in the property. However, a variety of other situations can also lead to the issuance of a Mesher Order. For instance, if one spouse lacks the necessary funds to purchase the property’s ownership, a Mesher Order could be granted. Additionally, in certain cases where market conditions are unfavourable, a Mesher Order may be considered.

PREVENTING THE FORCED SALE OF A PROPERTY

Typically, Mesher Orders have a set duration. This implies that the order will eventually run its course, enabling the property sale to go ahead. In some scenarios, a ‘trigger’ event might occur before the Mesher Order expires. For example, the order will cease to exist once the children living in the home reach 18 years of age, or if a parent accrues enough funds to buy out their share of the property.

It’s crucial to note that a Mesher Order can be rescinded immediately if both parties are in agreement. The principal reason for its existence is to prevent the forced sale of a property when one party opposes it.

POINT OF CONTENTION BETWEEN EX-SPOUSES

In the wake of a divorce, the sale of the shared home can often become a point of contention between ex-spouses. A fundamental factor to bear in mind is that the financial division resulting from the sale must be mutually agreed upon. If an agreement cannot be reached, the situation necessitates court intervention.

It’s essential to understand that no individual has the power to unilaterally decide the sale of the marital home, even if they hold exclusive ownership on paper, be it the deed or the mortgage agreement. The ex-spouse retains certain rights to the property. However, the extent of these rights hinges on a multitude of factors.

DRAFTING A LEGAL AGREEMENT

Should both parties find common ground regarding the distribution of assets post-sale, it’s prudent to formalise this consensus through a legal agreement. This document should be drafted with the help of a qualified solicitor to ensure accuracy and fairness. Both parties are required to sign this contract to validate its terms.

Once the agreement is signed and in place, the path to selling the house after a divorce becomes significantly smoother. With clear guidelines and mutual consent, the process can proceed without unnecessary complications or disputes.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.