Housing needs and divorce

The question of, where a divorcing couple and their children may live following separation and divorce is often one of the most pressing and worrisome issues facing a couple.

Accommodation is a basic necessity and yet the family home is often so much more than just accommodation. It may have strong emotional meaning or hold bad memories. It may also represent a significant proportion of the family assets.

The family home

When considering the financial aspects of a divorce, the family home is considered as part of the overall picture. What happens to the family home, will very much depend upon the facts of the particular case. 

The first step is for both of the spouses to provide each other with full financial disclosure of their respective financial positions. With regards to the family home, it is likely to be a good idea to get a couple of market appraisals from local estate agents to identify what the property is likely to be worth and also get information from the mortgage company to confirm how much is owing on the mortgage and also whether there are any penalties that might be payable if the mortgage was paid off now.

When considering a family home that is owned either in joint names or in a spouse's sole name, there are generally three potential outcomes:

1)    The house is transferred to one spouse on an outright basis. This might be in return for a lump sum payment to the spouse leaving the property or in return for “giving up” a share in other assets such as a business or pension (offsetting)

Where the house is mortgaged, this will almost certainly require consideration as to when and how the spouse leaving the property is to be released from the mortgage and whether any mortgage payments along with the general cost of upkeeping the property going forwards are affordable. When considering the options, it is a good idea to speak to an independent mortgage advisor to find out whether you can borrow sufficient to take on the existing borrowing and if there are no other assets to trade off again, borrow sufficient additional money to raise a lump sum.

It is also really important to consider how the housing needs of the spouse leaving the property are to be met. Where assets such as business interests or pensions are being used to trade off that interest, whilst they may be of significant value, they may not be easily realisable to fund the costs of alternative housing.

2)    Another option when dealing with the family home is for this to be sold and the proceeds divided to enable the divorcing couple to purchase either one or two alternative properties or move into rented accommodation if there is insufficient to allow either to purchase.

This is a likely option if it is considered that the family home is bigger than is reasonably required and there are insufficient assets to allow the luxury of both being housed in larger properties than they need or its retention is unaffordable. For example, a couple who are divorcing and have one child would have difficulty in suggesting that either of them needed a 4 bedroom house.

In this situation it is essential to know what each spouse's mortgage capacity might be and also what the cost of alternative accommodation could be. Property particulars can be obtained from estate agents or online platforms such as Rightmove. 

When considering alternative accommodation it is a good idea to identify the areas that would be likely to be suitable having regard to children’s schools or commuting distance to work. Unless there are exceptional reasons, it is unlikely to be justified for a spouse to suggest that they need bigger or more expensive accommodation than that offered by the family home nor a need to move to a more expensive area. Where assets or borrowing capacity is limited, consideration can also be given to shared ownership schemes.

3)    A third option when dealing with the family home involves the property (or an alternative property) being retained until a specified point in the future on the basis that until that point, one spouse will move out and allow the other spouse to live in the property.

The specified point in the future when the house must be sold will commonly include the point when the spouse staying in occupation remarries or cohabits, voluntary sale or death and any children attaining the age of 18 or finishing full time education.

There are a couple of ways that this can be reflected legally: 

One involves no transfer of the legal title (the deeds remain in joint/ sole name) but to provide protection to both spouses, a declaration of trust is set out within a court order or separate document which confirms the basis on which the property can continue to be occupied and also when the property must be sold and how the proceeds of sale must be divided. 

The other involves a transfer of the legal title into the sole name of the spouse who is to live in the property (if not already in their sole name) and then a legal charge being secured against the property. This legal charge document again sets out when the spouse who left the property is entitled to their share and how that share is to be calculated.

This option is of particular help where there are children of the family but there is simply insufficient available assets to fund two properties. Rental accommodation may be a potential option but this does not provide the same level of stability and security for either party nor their children and will often result in them having to dip into their capital. This option allows for both spouses to leave their money invested in the family home and secured until a future point.

It does of course have its drawbacks as it results in one spouse being denied access to their assets for what can be a significant amount of time and consideration must be given as to how their housing needs are to be met in the meantime. 

For the spouse living in the property, whilst they will benefit in having secure accommodation for a period of time, there will come a point when they have to either repay their spouse or sell their home and look for new accommodation. Whilst, they will have some time to plan their options in this regard and build up their income, for example, the reality is that no one knows what the future might hold.

When considering which of the options to use when dealing with the family home, it is also necessary to consider the question “How Much?”: How much should a spouse be paid for their share, either now or at some point in the future? How much should each spouse receive on a sale of the property?

The law of England and Wales allows for jointly owned property to be held as either joint tenants or as tenants in common with specified shares. For couples who are not married, their interest in jointly owned property is usually determined at the point at which they purchase the property and in the absence of fraud, mistake, duress, actual, implied or inferred trusts or dependent children, is not likely to change.  

However, the law for married couples who are divorcing is very different. In such a situation, any agreement regarding the spouses share in the property as set out at the time of purchase are not conclusive and are merely one of the circumstances of the case that need to be considered to achieve fairness.

In order to achieve fairness on divorce, all assets are taken into account including assets which are in joint names or in the sole name of one spouse. The starting point for consideration is an equal division of what may be regarded as matrimonial assets and in most cases this will include the matrimonial home. However, all of the circumstances must be considered including;

• The needs of any child of the family under the age of 18
• The needs of the parties
• The parties incomes, earning capacity and resources
• Conduct if it would be inequitable to disregard
• Length of the marriage
• Standard of Living
• Contributions.

The scope of the discretion available to the court means that, as set out at the beginning, every case turns on its specific circumstances. By way of example; a short marriage with no children and no relationship generated need where all assets including the family home were owned prior to the marriage is not going to result in an equal division if any division at all. 

However, in the case of a long marriage in which one spouse may have sacrificed their earning capacity to take care of the children, the source of the family home may have far less importance.

Given the complexity and importance of decisions surrounding finances as part of divorce proceedings it is very important to get advice from a family solicitor. 

At Birkett Long LLP, our family solicitors are specialists in their fields and we pride ourselves in providing understandable, practical advice specific to your situation. If you would like to know more about how we can help you, we offer a free 15 minute no obligation telephone call. I can be contacted on 01206 217305 or alternatively email me at [email protected].