The matrimonial home in a financial settlement on divorce

In divorce proceedings the family law court financial settlement hearing will decide an appropriate ancillary relief package in cases where ex-spouses contest the division of family assets. Ancillary relief is the general term applied to financial or property adjustment orders that the court will make ‘ancillary' to the marriage dissolution. In most instances the core of the order will be in determining the fate of the matrimonial home. This occurs not least because the home is usually the most valuable asset available to the parties of the marriage, but additionally because the court will be attempting to operate a ‘homes for all' policy.

As articulated in M v B (Ancillary Proceedings: Lump Sum), the courts will be concerned with providing a home for both parties. However, the welfare of minor children and the provision of a suitable home for them will be at the forefront of the court's consideration. Pursuant to section 25 of the Matrimonial Causes Act 1973 (MCA 1973) the court will nevertheless consider "all the circumstances of the case" which inherently leads to a conundrum for the court in that it will try to solve at least three main aims that may be inconsistent and mutually exclusive; these being to:

  • Maintain a home for the minor children and the parent who has been granted the residence order;

  • Provide a home for each party; and

  • Make a fair division of the family assets.

To effect such provisions the family law court has, under s 24 MCA 1973, the ability to order a transfer of property to whichever party as it sees fit, or to order the disposal of the marital home in order that proceeds should be divided to provide capital for the purchase of a home for each spouse.

Further, the court is likely to approach the ruling regarding the family home with reference to the above listed provisions and in the same order of importance leaving three possible outcomes for the matrimonial home in the financial settlement:

  • Immediate sale and division of the proceeds in the proportion as decided by the court;

  • Outright transfer to one party; or

  • Creation of a trust for sale.

Selling the matrimonial home

The economic climate at the time of the financial settlement hearing is central to the ruling as it may affect any decision to order immediate sale of the major asset. The judgment will take into consideration the following:

  • Whether there is sufficient equity in the home to provide two new homes for each party. Where there are children of the union, the court will consider how such a move might affect the children in terms of upheaval in their schooling, for instance;

  • Whether there is enough equity to make the sale worthwhile where one estranged party already has alternative accommodation (for example where one spouse has moved in with a new partner). That is to say, immediate sale of the matrimonial home would be made to raise essential capital for both parties, but that one party may not necessarily use the funds for housing. The funds will then be disposable as that party so wishes or invested to provide future housing capital; or

  • Whether there is equity in the property. Where there is little or no equity in the property and the parties have struggled to afford the home as a couple, and one party on their own will be unlikely to be able to afford mortgage payments, particularly in times of recession and/or high unemployment, the court may well order a sale of the home. Whatever proceeds are returned from the sale will then be divisible between the parties according to the court's order to provide capital for each spouse.

Outright transfer of the property

An outright property transfer may be suitable as part of a clean break settlement, or in a case such as Bryant v Bryant whereby the property constitutes the sole means of financial security the court can award to the parent with care of the children. In this particular case the court could see that the husband was unlikely ever to support his ex-wife and children, and the most pertinent method of securing their future was to award them the husband's share of the matrimonial property.

To execute an outright transfer order the court may determine that:

  • The spouse maintaining residence ‘buys out' the other party's financial interest in the home by means of an immediate cash payment; or

  • The transferee offsets the spouse's interest in the property by foregoing some other financial benefit from divorce, such as periodical payments (maintenance); or

  • The party maintaining residence in the home shall pay either a court-ordered fixed sum or a percentage of the proceeds from the sale of the house either at a date identified during the financial settlement, or upon a certain event, or when the transferee decides to sell the property. This could mean that the order is not completed until the death of the transferee, thus, this last option is incompatible with a clean break settlement.

Trust of land

A trust of land under s 24 MCA 1973 is appropriate where a home needs to be provided for one of the parties to the marriage, such as where minor children need to be housed with the parent with care, and immediate outright transfer is not possible.

There are many variants of provision for trusts of land such as the Mesher order whereby the sale of the property will be triggered by an event, often being when the youngest child leaves full time education, or the Martin order whereby the triggering event is not linked to children and may be enforceable only after the death of the occupying spouse.

However, in the case of Mesher orders, problems may arise at the time of sale. Equity from the sale of the property may not be enough to re-house the occupying spouse who may, with increased years, find it more difficult to obtain a new mortgage, especially if the value of property has fallen since the order was made. Therefore, the court is now, wherever possible obliged to strive for a ‘clean break' order where there is no on-going financial obligation between parties to the marriage.

As different divorce cases have appeared in court and the judge's ruling has been made, variants of the above orders have, over time, been attributed the name of the case synonymous with any significant ruling, such as the Harvey order or the Hanlon order. However, it is important to note that each individual ancillary relief order will be considered on its own criteria.

Drafting of orders

Whatever measures are required or agreed by each party to the divorce in order to appropriately deal with the matrimonial home, the details must be accurately and formally incorporated in a draft order compiled by a divorce solicitor and subsequently presented to the court for approval or amendment. All other financial considerations such as provision for periodical payment orders, lump sum payments, pension attachment orders and stipulations for the meeting of costs will also be included in the draft order.

Advice on property division in a divorce financial settlement

The JMW family law team has a wealth of experience in complex financial settlement cases and has access to valuation, taxation and all relevant financial expertise to assure clients achieve the best property settlement possible.

Wherever feasible we approach property claims on a conciliatory basis, however, should it not prove workable to use this approach, for example due to unreasonable demands made by the other party, we believe in bringing a positive, cost-effective contribution to resolving a financial settlement on divorce through the application of swift, no-nonsense legal actions.

For a no-obligation discussion regarding your divorce financial settlement please call us on 0345 872 6666


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