When a couple decides to separate and divorce, one of the biggest concerns is often around the topic of the jointly-owned home.
The home is usually the largest financial asset a couple will own together and separating spouses will understandably often want the security of knowing where they will live going forward, especially if there are children to be considered.
Unfortunately, there is no straightforward answer as to what happens to a home in the event of a divorce and it very much depends on the individual circumstances, whether there are children to consider, and what other assets are involved.
Where the jointly-owned home is concerned, there are usually three options…
#1 one spouse buys out the other spouse’s share of the property.
If one spouse wants to stay in the home and has the financial means to do so, they could look to buy the other’s share of the property. A Surveyor’s valuation would be required to determine the value of the home and a calculation would then be made on how much it would cost to purchase the share. It would need to be agreed between the parties – or the courts – what the share should be. This can come down to how much has been paid towards living costs over the years and should always be considered as part of the wider financial settlement following divorce.
#2 the property is sold and the proceeds are divided.
In this situation, a percentage of the property that is owned by both parties would be paid to them after the property is sold and any mortgage debt and fees have been repaid. As above, the percentage itself would need to be agreed between the parties, or in the event that an agreement couldn’t be reached, the court would look at all of the circumstances and decide. This can be problematic where one party has paid more than the other over the course of living together and this is not reflected in the way the property is legally owned.
#3 the sale is deferred until a later date.
Where there are dependent children, it may be agreed that it is best if one spouse stays living in the house with the children until they reach adulthood/finish full-time education or another pre-determined date. This is sometimes called a Mesher or Martin order.
It’s important to remember that if you have lived in a property as a marital home, you can’t be forced to move out (unless there is a domestic violence order). You should also be aware that if the mortgage is in both of your names, you still have a liability to pay the mortgage – even if you have decided to move out. In practice, an arrangement is usually reached as to how the mortgage costs will continue to be met.
Another key thing to remember regarding property and divorce is that it’s not just the family home that would be considered as part of a divorce settlement – any properties, whether owned jointly or in individual names, will be considered as part of the marital assets.
In an ideal world, it should always be the goal to try and resolve what will happen to the shared home and any other assets as part of a financial settlement between the parties themselves. This can be achieved by way of informal discussion, mediation, collaborative law or arbitration. Where a financial settlement is agreed upon, this then needs to follow due legal process and be formalised by the court. If an agreement cannot be reached, what will happen to the home, along with any other assets considered part of the ‘marital pot’ will be decided by the court. This route will usually prove more contentious and the outcome may not be desired by the spouses.
Protecting your financial situation when buying a home together should start at the time of purchase. A Declaration of Trust, also known as a Deed of Trust, is a legal document that sets out how any equity would be divided if the property were to be sold or if one party is later removed from the deeds. Although the Declaration of Trust can be overruled by the court, it does at least provide an indication of what the couple’s intentions were regarding the property and any future sale proceeds.
For further help or advice in relation to property upon divorce, please get in touch. Anthony Jones is a Director, Head of Family and a Resolution Accredited Specialist and can be contacted on 01457 761320 or by email anthony@odonnellsolicitors.co.uk
