In the majority of divorces, the biggest issue to resolve insofar as matrimonial property is concerned is that of the matrimonial home. Separation of individual and personal property is normally not a problem and the easiest way to deal with this is for both parties to compile a list of everything in the home. This includes furniture, carpets, kitchen utilities, other household goods and then of course the personal items of each person.
I remember during my own divorce, the only two real issues that arose was that of the house in which we lived and a collection of Iranian carpets, each of which had considerable value. I will not pretend that these two items were not the cause of some heated discussions but since our children were involved, we decided to sell the property and divide the carpets equally between each of us. What I refer to as the “goods and chattels” were equally divided in relation to our individual needs, our attachments to any particular items and finally a financial understanding between us with regards to the remaining goods.
We both realised early on in our discussions that if we were to involve solicitors as arbitrators to reach an agreement as to who would get what, this could prove both time-consuming and extremely expensive. I am reminded of the divorce between Paul McCartney and Heather Mills in 2008 where it was rumoured that the combined total of their respective legal fees exceeded £4,000,000! Apart from the carpets and the home, there was little to discuss and therefore it was more prudent to reach agreement between ourselves.
As I mentioned earlier, the biggest issue always relates to the division of actual matrimonial property. In the United States and indeed several other countries, a pre-nuptial agreement is often reached between husband and wife prior to the actual marriage ceremony. This document basically states what will happen if and when the couple divorce; who will get the house, who will get the cars, and who will get anything else! Currently such agreements are not recognised in the UK although the Law Commission started a project in 2009 to examine the status and enforceability marital property agreements. This was further extended in 2012 to include a review of financial needs and non-matrimonial property. Although the final report was published on 27 February 2014 along with a draft Nuptial Agreements Bill nothing has been finally agreed at this time.
The element known as “financial needs” is extremely important when it comes to the separation of property in the divorce, particularly if an amicable arrangement cannot be agreed between the husband and wife. This is normally the time at which matters are brought into court and are ultimately decided by a judge, a term known as “applying for ancillary relief.” Either the husband or wife can apply for ancillary relief but it is typically the lesser earner of the couple who will make the application. By the way, the court when reaching a decision, will act in the interests of both of you, regardless of which one has made the application.
So let’s go back to the actual property.
The most important aspect of any divorce with regards to the division of the home property is how that division will affect any children from the marriage. The courts will look at the financial needs of the husband and wife and this specifically applies as to whom the children will live. Always remember that the children have a lot to lose in any divorce, apart from the split between their parents. They will not really want to move out of the area when the split occurs. They have their friends, clubs and of course, their schools where they presently live. Maybe the wife does not have a job but is a stay-at-home Mum. So the chances of her being able to purchase a new property, indeed rent another property, are normally slim, unless some form of financial support is given by the husband, known as maintenance.
All too often, the divorce becomes so bitter that no reasonable agreement can be reached between the two with regards to who will retain ownership of the family home. It is also often the case that neither party can, on their own, afford the cost of continuing to pay the mortgage on the property. This inevitably means that the property will have to be sold, which again brings about the question of who gets what after the sale has been completed!
I cannot stress enough that in any divorce, no matter how amicable, the well-being of any young children must have precedence over any other consideration. In my own case, both my wife and I were able to rent properties relatively close to each other so that it was easy for our children to visit both of us, pretty much at a time of their choosing. Furthermore, they kept their friends and were able to continue their schooling without interruption.
If it is going to be left to the courts to decide how the property should be separated, then the judge will favour that person who will have prime responsibility for looking after the children – usually the wife. The judge will have to find out whether one parent can purchase the interests in the property from the other parent, either by means of a second mortgage or by financial assistance from that parent’s family. If this is not a feasible option and as I mentioned earlier, can the parent who will be responsible for the children, afford to continue paying the mortgage? Can the other parent afford to both assist with the repayments and purchase/rent another place in which to live? All too often, the only solution is to sell the property and equally divide what is left from the sale between both husband and wife.
However this brings us to another disturbing aspect of property ownership.
We are all too aware of the fluctuation in property prices in the last few years, particularly with regards to negative equity. How it has affected people will depend on when the property was initially purchased as well as the amount of the outstanding mortgage on the property. In my case, I was fortunate as the family property had been purchased when prices were extremely low and the value had increased by some 300% when our divorce occurred. Unfortunately, this is not the case for everyone. The “boom and bust” era over the last number of years has meant that a) those people who purchased at the top of the boom and b) those who took a second mortgage based on the inflated value of the property have suffered the most. A recent report on BBC revealed that the percentage of owners whose property had fallen into negative equity ranged between 41% and 1%, depending on which part of the UK they lived, the worst affected area being Northern Ireland.
You should never forget that in a marriage, it doesn’t matter in whose name the property is registered as both have equal share to its residual value, if any! Whilst the property may well be registered in say the husband’s name, the mortgage is normally in the name of both parties and so both are liable, individually and collectively, for the repayment of any mortgage on the property.
A divorce can be a long, arduous, expensive and debilitating period in a couple’s life, particularly when it is an acrimonious one. The ultimate aim is to get it “over and done with” as soon as possible so that each can get on with their lives. Amicable disposal of the family property is normally the inevitable sticking point and most of the time results in its sale to bring the marriage to a final conclusion.
This article is aimed at those “normal” people such as myself, who do not come from wealthy families or have massive savings put aside for a “rainy day.” Because of the current rate of inflation, many of us find it extremely difficult to “make ends meet” and whilst this does not necessarily mean we are “broke” it does mean that several months without a pay check can cause untold worries to any family, let alone an individual person going through a divorce. So speed in the sale of the property is of the essence but whilst there is a small uplift in the sale of properties, this does not apply to all areas of the UK and even then, values are still low.
Let me be clear; the ultimate aim of the sale is to produce an amount of money that can be divided between the husband and wife, normally on an equal basis, so that the failed marriage can be concluded once and for ever. Therefore, the pressure is on to dispose of the property as soon as possible, yet at the same time to produce the largest amount of cash that the sale will allow.
When considering how to sell the property, it is unusual for either the husband or wife to know a friend or relative who will make an offer to buy. Even if that is the case, you can be almost sure that there will be an argument over the value of the property between the husband and wife. So they approach and agreed estate agent to sell the property on their behalf. As a result of the present economic situation of the country, this can be a slow and expensive process.
The property has to first be brought up to a good state of repair before it is advertised. There is then the time that is involved with all the viewings and going through the process of receiving an offer, deciding if it is the best and then inevitably waiting for a potential purchaser to arrange and agree their own mortgage facilitates. This process can take many months and in the current market can, in some areas, take several years to complete an acceptable sale. Meanwhile, the mortgage still has to be paid as do the running costs of the home and the final divorce seems to be further and further away. On top of all this are the legal costs that will be incurred in completing the sale and of course, this does not include the estate agents’ fees that can be anything from 0.5% up to 2.5% of the final sale value of the property.
Sometimes, both parties decide that it is in their interests to look at the possibilities of a cash sale, which can often result in the actual market value of the property being secured. The advantages of selling a property in this way are many. It enables a very quick sale to be concluded, often within a matter of days. This in turn means an early settlement of any outstanding mortgage which results in the curtailment of continuous mortgage repayments, even if the mortgage is an “interest only” one. It can allow legal fees associated with the sale to be reduced to the absolute minimum and of course, there would be no estate agent fees to be deducted from the final sale amount. Last but not least, it enables the husband and wife to finally divide their assets, conclude their marriage and get on with their own new lives.
You may well consider that such a sale is very advantageous to both of you and we can often help in this regards.
Click here to learn more about selling your house after a divorce, and you may also want to check out the list of 5 things you should know about property and divorce laws.