When it comes to divorce, dividing up assets can be one of the most difficult aspects to navigate. This is especially true when it comes to deciding how to divide a family home – an asset that often holds both emotional and financial value for couples going through a divorce.
Following a dispute over matrimonial assets, the court may order that the house should be sold, or it may be transferred to one of the parties. However, this can become more complicated if there are loans or a mortgage involved as the lender would need to consent to any dealing with the house.
In this article, the expert family law solicitors at Ramsdens will discuss the laws governing division of property in divorces in England and Wales, including whether a court can divide a house differently from other assets, what happens to joint mortgages, and options for couples who separate.
How are assets divided in a divorce?
Any property or land held by either partner during their marriage must be considered when deciding who will retain what after a divorce. In some cases, this can be simply agreed between the two parties however it is always sensible to ensure that any agreement is considered by a legal representative and a consent order obtained, to ensure no further claims can be made by either party at a later stage. Additionally, without the assistance of a solicitor, one side may not receive a fair settlement.
The ownership of a house is typically dealt with in one of four ways:
1. The property may be sold and the proceeds divided between the two parties, whether divided equally or not. This may be the most simple way to divide a house in a divorce, but it can still bring a number of issues; a dispute may arise over the financial settlement and it will require both parties to search for a new place to live, which can be a stressful and lengthy process. Additionally, the property may have decreased in value since it was purchased, or the settlement may leave one or both parties without the necessary funds to secure a new property.
2. One party may purchase the property from the other, allowing both parties to live separately with the assets or financial settlement allowing for them to move on. This may benefit both parties as it can be safer than attempting to purchase two new homes in a difficult housing market however any lender would need to consent to this transaction taking place. However, the main downside to this approach is that it requires one party to have enough financial resources to acquire the whole house, which was originally owned by two people.
3. Both parties agree to continue to reside in the house (however this is highly unusual) as whilst this may be a simpler option financially and may allow for the repaying of a mortgage by both parties, any animosity can bring complications to the living arrangements. If the mortgage loan is almost repaid, the parties may agree to reside in the house until it is resolved and then sell the house and divide the proceeds.
4. A Mesher order could also be agreed which is an order whereby one party remains living in the family home until a triggering event occurs such as a child reaching the age of 18 or finishing their education however the parties would still need to agree as to the distribution of the net proceeds of sale once the house is sold.
In cases where the parties cannot agree on how to share the assets, the family court may become involved. The court’s first priority is the welfare of any minor child, but it will then consider various factors when deciding on how to divide these assets:-,
- the income, earning capacity, property and other financial resource which each of the parties to the marriage has, or is likely to have in the foreseeable future.
- the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
- the standard of living enjoyed by the family
- the age of each party to the marriage and the duration of the marriage
- any physical or mental disability of either of the parties to the marriage
- the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family
- the conduct of each of the parties, whatever the nature of the conduct, if that conduct is such that it would in the opinion of the court be inequitable to disregard it
- in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring
All of these factors contribute to the overall needs of each party and will help the court to decide what the best solution is for those involved.
What orders can the court make?
The family court may make one of the following orders:-
1. Property Adjustment Order (transfer)
The court may determine that the property is transferred to one party, subject to the mortgage responsibilities. The court may deem this appropriate if one party can purchase the other’s interest or it can be necessary if it is not economical to order an immediate sale, particularly if there are children living there or anyone with a disability.
2. Sale of Property Order
The court may decide that the disputing parties should sell the house and divide the proceeds. The court can also decide what percentage of the proceeds each party should receive.
3. Mesher Order
A Mesher order will defer the sale of the property, allowing one or both parties to remain living at the property, usually until a child reaches the age of 18, or when a significant financial payment is made to one party, allowing for the safe sale of the house and comfort for the family for the foreseeable future.
3. Martin Order
Similar to a Mesher order, a Martin order allows one or both parties to live at the property with the suspension of the house's sale. The difference between the two orders is that a Martin order is used where there are no children and so the trigger factors for sale are different.
Although this article deals with property transactions it is imperative in any negotiations that all the assets and liabilities of a marriage are considered including pensions to ensure a fair division is obtained of all assets.
For further advice on any aspect of dividing property or other financial resources in divorce, speak to our team today. Contact us on 01484 821 500, or fill out an online contact form, after which we will call you at a time specified by you.