The financial implications of divorce
If a relationship ends in divorce, the emotional fallout can be overwhelming. Practical aspects of the break up can seem impossible to even consider let alone work out. However, they have to be addressed and in many cases the sooner the better. Remaining living together when a relationship is over can be enormously stressful. If one person moves out to rent then the cost of paying rent in one home and a mortgage in another can tip precarious family finances over the edge.
There is a starting point of an equal division of capital but the needs of both husband and wife to be re-housed and to have enough money to live on will often dictate the outcome. What should happen to the family home can often be the most difficult area to resolve.
Who will get the house if we divorce?
This is probably the most asked question of family lawyers. The answer will often be neither of you. The family home may be the biggest asset. You may both be very attached to it but the figures may mean remaining in it is simply not viable. Obtaining agreement to a sale can be tricky. Even where the home is in the sole name of either husband or wife, the non-owning spouse can prevent the sale of the property without their consent in the short term. In the longer term if the sale does happen the spouse who owned it will not necessarily receive the entire proceeds of sale.
If you are the spouse objecting to a sale, it is important to be realistic about the potential outcome of your case. Unless there are other substantial capital assets to re-house your husband or wife, a sale is likely.
If you are the one who wants the property sold and are also the one paying for it, brace yourself for a wait. Until you negotiate a settlement or obtain a final court order for sale of your home it will not be sold. Unless you can negotiate a mortgage holiday the mortgage and normal outgoings will have to be paid in the interim. If you have already moved out this will be in addition to paying rent or a mortgage on a new home.
If only one of you works this can be particularly difficult. So far as possible, particularly where there are children, the status quo will be maintained.
What about the children?
It is important to create as much stability as possible for any children during the divorce and accompanying financial process. Their welfare is a key consideration. This may mean that the parent with care will obtain over 50% of the capital from the matrimonial home to take into account the children’s needs. However, where possible, the other parent should have a property suitable for overnight staying contact, so these needs must be balanced.
In some cases, particularly where there are children, it may be possible to stay in the home whilst your spouse instead has a charge over the property or a percentage ownership of it. This will not be forever but until a fixed date when it must be sold. This might be when the youngest child reaches 18 or until the spouse who is staying put remarries or cohabits for a long time. However such arrangements are problematic as they are complex to structure and fail to achieve what the majority of couples want, which is to be separate their financial arrangements so far as they are able. If mortgage payments on the house are high it may also not be an affordable option.
Who gets the television ?
All couples find dividing their belongings and the contents of their home very hard. Some find it impossible and lawyers and the court can become involved. Clearly this will be costly. It may be better to buy a duplicate item than spend time and money arguing about it. If you anticipate problems make a detailed inventory. Try to establish principles such as that each will keep gifts to them and that family items will stay with the person whose family originally owned the items.
What if I’m not married?
Living together does not mean that you have acquired any legal rights. There is no such thing as a common law marriage.
If a couple buy a home together they should formally agree how the property is to be shared. If they don’t when they sell the property there can be a battle about how the proceeds of sale should be split, and even whether the property should be sold at all. The law may change but probably not anytime very soon. In the meantime couples should set out how the property is held at the point of purchase. This should be made clear either in the transfer document or in a separate Declaration of Trust. This can avoid complex and potentially costly litigation later on. If a couple already own a property but have not done this they can still do it after the event as long as they both have legal advice.
Sarah Whitten is a Partner specialising in family law at Charles Russell LLP
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