When a couple has made the difficult decision that they need to divorce, the question of how to divide their assets between them inevitably comes up. One of the main assets a couple has is often about their family home. So, who gets the house in a divorce? How do we decide?
In an ideal world, there would be enough profit in the house for the couple to be able to sell it, pay off the mortgage, all fees connected with the sale, split the proceeds equally and still each have enough to buy a suitable house for their life after divorce. However, life is usually not that straightforward.
This article will explain the options that are available, and although it is nearly always better, less stressful (and much cheaper) for all concerned to come to an agreement themselves rather than applying to the courts for them to decide, it helps to consider the approach the courts would take in making a decision.
How would the courts decide?
The court has to consider a range of factors when making a decision about how the assets of a marriage are to be split. These are set out in the Matrimonial Causes Act of 1973 – half a century old now, but this Act still guides the way the courts have to come to their decision.
They always base their decisions on the needs of the people involved. What they need, of course, may be very different to what they want or what they think they might be entitled to. The main issues as far as the house is concerned are:
Were you married/in a civil partnership or just cohabiting as if you were a married couple? If you were actually in a civil partnership or married, it is more clear-cut. The house is a marital asset and both of you have more rights under marital law than if you were not married, even if the property is just in your ex-partner’s name. If you were married and the property is in your ex-partner’s sole name, marital law gives you certain rights as regards the property. If you were not married and the property was in your ex-partner’s name, you have no automatic rights to it. If you were not married and the property is in joint names, the proceeds of the property are usually split 50/50, unless a different split is recorded in the deeds.
Whether you have children. The courts prioritise the needs of the children above all else. This means that if the children are mainly going to be living with one of their parents and visiting the other from time to time, the parent who is looking after them needs to be in the right size of house to accommodate them more or less full time. So, if there is a boy and a girl, that parent realistically needs a 3-bedroomed house. As a result, that parent could well need significantly more than a 50% share of the house to be able to buy a suitable property with the level of mortgage they are likely to be able to raise on their salary, in which case the court will be more likely to award a greater share of the house to that parent.
Current earnings and earnings capacity. This will affect how much each person could borrow to be able to buy their own house after the divorce. If there is a big difference between how much each earns, or would be capable of earning if they moved from part-time to full-time hours, the person with the higher earnings will be able to get a bigger mortgage and would technically need only a smaller amount of equity from the house. So, think about, for example, a divorcing couple with one child who has just started secondary school, who will be spending equal time with their parents, living with each of them for two weeks at a time. Realistically, even though they have been used to a very spacious four-bedroomed house which they are now selling, each of them actually needs a significantly smaller two-bedroomed house for the future – one bedroom for the parent, one for the child. Person A earns £65,000 a year and Person B earns £40,000 a year. There will be £180,000 left over from the sale proceeds after repaying the mortgage and all fees.
The minimum they will each need is a small two-bedroomed house in the area, convenient for their child’s school. These houses cost around, say, £300,000. Person A can borrow £260,000 on a mortgage based on their salary, but Person B can only borrow £160,000 on their lower salary. So, Person A needs £40,000 from the existing property and Person B needs £140,000 to allow each of them buy the size of property they actually need, taking their child’s needs into account. The fact that the properties are not in as nice an area as the one they live in now does not matter as far as the court is concerned.
The couple’s ages. Age is particularly important if there is a big age gap as this can make a very big difference to how much mortgage the older person can raise to buy a new house. This is another factor that the courts would take into account when calculating a fair division of the house proceeds, particularly if there are no children – or if the children are over 18, even if they still live at home, because the court does not have to consider their needs.
Will the house have to be sold?
The house does not automatically have to be sold. It might be agreed that one party should remain in the former family home, particularly if that is going to be best for their children, to minimise the disruption to them and keep them near their school and friends.
However, there are practical considerations here. The property would need to be transferred into the sole name of the person remaining in the property and the other person would be taken off both the title to the property and liability for the mortgage.
Firstly, the mortgage lender would have to be satisfied that the person remaining in the property would be able to continue to pay the mortgage based on their salary. They will not release one party from liability for the mortgage payments unless they are satisfied that the remaining person can manage the repayments on their own. This can be particularly problematic if the mortgage was originally granted based on joint incomes. They might insist on the amount owing on the mortgage being reduced to a level that they are happy the remaining person can afford before agreeing to the change. So, the person remaining in the property would have to have a lump sum, not raised through borrowing, to inject to reduce the mortgage.
Secondly, the person leaving the property is entitled to their fair share of the value in the property. This means that the person remaining in the property will have to “buy out” the other person’s share, in addition to possibly having to find a lump sum to reduce the mortgage.
If one party is buying the other out, how much will that be?
This is a matter for negotiation between the two of you, and mediation can be a big help to both of you come to a reasoned agreement. Everyone’s circumstances are different. Considerations might include whether there was a big imbalance between the amounts each of you put in to the purchase of the property. This becomes even more relevant the shorter time you have been married, or since you purchased the property. Also, how much the property has increased in value during your marriage, and any imbalances between the amount of other assets, particularly private pensions, might be a consideration. If the person leaving the property has a larger pension fund, they might be more willing to accept a smaller buy-out payment in return for retaining a larger proportion of their pension fund.
Good independent legal advice is very strongly recommended in these situations, even if you are reaching agreement through mediation, to understand any potential legal or tax implication of the arrangements you are discussing.
In the end, if you are not able to agree a figure that you are both happy with, the property may have to be sold, even if this is not your first preference, and the proceeds split between you according to your respective needs.
Are there any alternatives to selling or buying the other party out?
One option that comes up in certain situations for discussion in mediation is to delay or defer the split of the property for a specified period of time. This could often be, for example, where the children are getting close to school-leaving age and both of you agree that it would be in their interests to have the stability of staying in their family home while they complete their school studies. This arrangement has to be confirmed by a court order known as a Mesher Order.
This means that one party remains in the property and the other moves out, but still retains a financial interest in the property – a specified percentage of the property value at a future trigger point in time, for example when the children leave full-time education, or the youngest reaches the age of 18. The person who has left then becomes entitled to their share of the value at that time of the property – in other words, they continue to benefit from any increase in the value of the property after they have moved out.
This is a complicated order to properly draft and you should very definitely both have independent legal advice if considering this sort of arrangement.
So how do we decide?
However you are reaching your agreement about what to do with the property, it is very important to have good independent legal advice from a solicitor. These are very difficult conversations indeed for a divorcing couple to sort out themselves, and it can be very expensive to employ solicitors to conduct the negotiations on your behalf.
Many people find that mediation is the most cost-effective way of discussing your specific situation objectively, without letting heated emotions cloud your judgement, and keeping the interests and needs of all parties, particularly your children, clearly in focus at all times.
Financial negotiations around divorce rarely end up with both of the couple feeling completely happy about the outcome and the family home, as well as being one of the largest financial assets most couples have, is also a particularly emotive issue. So, family mediation is very often the best way a couple can reach a fair and reasonable agreement that each can live with as they move on with their lives after divorce.
The mediator will always advise each of you during mediation to get independent legal advice about the arrangements you are proposing. The whole process will usually end with a Consent Order from the court, meaning that you are both safe in the knowledge moving forward that you have made a clean break and are protected from financial claims from your ex-partner in the future.
Talk to one of our friendly and experienced team to find out how mediation from Direct Mediation Services can help you as you pick your way through these difficult financial discussions with your ex.
Frequently Asked Questions
Does the house have to be sold in a divorce?
Not always. Particularly where it is important for the children’s stability, it might possible to find a way for the parent who will be mainly looking after the children to stay in the property. This would mean they have to buy the other person out of their share, and have to take sole responsibility for the mortgage in the future. Alternatively, an agreement could be made to defer selling the property until the children are older.
Do the courts decide on who gets the house in a divorce?
The courts should be the last resort when it comes to who decides on the exact split of assets, including the house. However difficult it is to have the discussions with your ex, you are much more likely to be able to accept the outcome if you have been directly involved in making the decision. Mediation is a cost-effective way of coming to an agreement that both of you can accept is fair and reasonable in your particular situation.
What do the courts specifically take into account when deciding on the house in a divorce?
First of all, the children’s housing needs are paramount. Then they assess fairly clinically what your housing needs are and use that assessment to judge how to divide up the value of the house. They take into account such factors as the divorcing couple’s ages, whether there is a big imbalance in their earning capacity, and how much each is likely to be able to raise on a mortgage to buy a replacement house. The result is often an unequal split when children are involved so that they have suitable accommodation to live in despite their parents’ divorce.
Why do you recommend me to take independent legal advice as well as mediation?
Mediators are not legal professionals. They are experts in helping couples agree between themselves how they want to resolve issues. Particularly when it comes to property, it is usually very important to have independent advice from a legal specialist to make sure that you will not be unexpectedly disadvantaged by the arrangements you want to make. For example, some arrangements could result in unexpected tax bills in the future.
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