Who Gets the House in a Divorce With Children?

In many divorce cases, what should happen with the family home can be the most contentious issue.  Often it is the most valuable asset within the marriage, although the pensions can sometimes exceed the value of the family home and it really depends on the case.  Certainly keeping the family home can be a very emotive issue for the parties to a divorce, especially if there are minor children at home.

What if we agree what should happen?

Some separating couples will actively choose to retain the family home for the sake of the children and agree to defer a sale of the property to a date in the future, perhaps when the children finish their education.  If this is agreed, that does not mean that the divorce and obtaining a legally binding financial settlement must wait until that date in the future.  The parties can still have a divorce and settle their financial matters with a legally binding financial Consent Order (financial agreement); which gives everyone certainty about what will happen in the future and when.  It can also mean that the ability to bring other financial claims arising from the marriage is ended at that point when the financial agreement is made legally binding.  It should be noted that a financial Consent Order cannot be entered into without the approval of the Court and the Court require the parties to have reached Decree Nisi (interim certificate of divorce) stage before they will consider a Consent Order.

If the parties agree an immediate sale of the property, it is also best to get a Consent Order in place to ensure there is certainty about how the sale proceeds should be divided and the Court’s approval about the division.  If a house is sold and the proceeds divided up without a Consent Order, it can cause havoc if it later transpires that what was agreed will not be approved by the Court or is unfair on one party.  Early legal advice can prevent this situation arising and our solicitors can provide helpful advice about the right and fair way to settle financial matters on a divorce.

What if we can’t agree?

There are a number of Orders the Court can make in relation to the family home – collectively known as Property Adjustment Orders.  These can include:

 
• Immediate sale of the property – which could be on the basis of an equal division of the sale proceeds or an unequal split, depending on the circumstances of the case;
 
• Deferred sale of the property – where the property remains in joint names until the future sale and again could be on the basis of an equal or unequal division of the sale proceeds.  Deferred sales are usually contingent on the children reaching a certain age or milestone in their education.  If a sale is to be deferred there are lots of other considerations, such as who should pay the mortgage in the interim and how the division of the sale proceeds should reflect that.  There are also potential Capital Gains Tax (CGT) implications of this option and the remaining owner may land the non-resident party with a large Stamp Duty bill if they want to buy another home, so specialist legal advice is key before agreeing this type of arrangement.
 
• Transfer of the property to one party’s sole name with a legal charge back for the other party.  The owner who transfers the property over to their former spouse will become a charge holder, like a mortgage lender, and will receive their share in the future at a date when the charge becomes enforceable.  Much like a deferred sale, the date is usually linked to a child’s age or milestone.  This option also has potential CGT implications and opens a whole raft of other issues, like seeking the consent of any existing mortgage lenders and the conveyancing required to transfer the property and register the legal charge.  Again specialist legal advice is key to agreeing this type of arrangement.
 
• Transfer of the property to one party’s sole name with a lump sum paid at the same time (i.e. a buy-out).  Quantifying the appropriate lump sum is much like deciding how to split the sale proceeds and will depend on the calculating equity in the home and determining whether this should be shared equally or unequally.  Whether this option is viable will depend on a number of other factors too, such as how much the party who wants to stay can raise as a mortgage and what the other party needs as a deposit to buy elsewhere.
 

How will the Courts decide which is the right option?

The Court’s first consideration is always the welfare of the children in determining financial matters.  It is not the only factor but it is certainly comes top of the list.  This means that if the children are housed in the family home and the party who they live with cannot afford to buy elsewhere, a deferred sale or one of the transfer options may be necessary.  This is particularly relevant if the children need to stay within a certain school catchment area.

The Court will also look at the whole circumstances of the case.  The needs of each party will often be a key factor.  Each party’s full financial position will be considered and every case turns on its own facts.

With a divorce there is an expectation that each party will be open and honest about their financial position and only once that information has been considered, can a solicitor give specific advice on what is a fair or reasonable settlement.  Our solicitors will guide you as to the best way to exchange (or obtain through Court if necessary) that financial information.

As solicitors we often hear clients speak of their friend or family member’s divorce and try to relate their friend’s outcome to their own case.  It is difficult to compare cases in that way because there is so much that can vary from one family to the next in terms of incomes, ages, number of children (and their ages), length of marriage and what other assets are involved.  A specialist in divorce and financial remedy cases can give clear advice on the options and how to achieve a fair and reasonable outcome.

What about the current Covid-19 crisis?

In determining the right way forward for any case with an owned family home, a lot will depend on the value of the home, the outstanding amount on any mortgage and the affordability of the ongoing mortgage repayments.

In these uncertain times, it can be difficult to obtain a valuation from an estate agent or surveyor and in some cases the uncertainty at this time may mean that long-term settlement decisions for some cases are placed on hold.  Other cases may require action on a more urgent basis because of the current uncertainty.  Interim issues can of course still be dealt with and agreeing who should pay the mortgage and what should happen with other outgoings are all things a solicitor can advise on.  If long term decisions about the family home are on hold, there are often other things that can be resolved in the meantime too, such as pension negotiations, which can take longer anyway, if expert pension advice is also needed.

The Covid-19 crisis is unchartered territory for all at present, but the experts across our offices have lots of experience in dealing with these financial settlements which will undoubtedly prove invaluable in navigating clients through the options open to them.

Legal advice from a divorce solicitor

Each matter will be decided on its own facts and it is important that you obtain early legal advice, in order that you can make an informed decision on how best to proceed in your own circumstances.

For further information and to book an appointment, please call 08000 320999 or email: mail@familylawgroup.co.uk