For many people, the first week back in the office after the Christmas break tends to be quite subdued. A few emails to catch up on, perhaps. Maybe the odd meeting or conference call. For those who practice family law however, it’s notably one of the busiest weeks of the year, writes Louisa Fletcher
So busy, in fact, that the first working Monday of January is known colloquially in judicial circles as ‘Divorce Monday’, given the number of new clients who contact a solicitor as soon as possible after the Christmas holidays to deal with the breakdown of their relationship.
This seasonal surge in cases generally is a result of one of two factors: either it’s a mutual decision of parents agreeing to give their children ‘one last Christmas together as a family’. Or, it’s the result of existing fault lines in relationships being fuelled by the stresses and strains of a hectic festive season which culminate in a ‘new year, new start’ decision by one party, often coupled with a vow to never have to suffer through another Christmas with the in-laws again.
Aside from the emotional fallout of such situations, there is of course the complexity of how any property assets are divided. Losing one’s home and one’s partner at the same time can be devastating, particularly if the bolt has come from the blue.
One key element that does surprise – and sadly catch many people unawares – is that there is a significant difference in law between the rights of couples who are married and divorcing (or in a civil partnerships which they are dissolving) and those who were co-habiting and now going their separate ways when it comes to property.
As Barbara Reeves, Family Partner at the law firm Mishcon de Reya explains, ‘The Court has wide redistributive powers to transfer assets from one of the spouses or civil partners to the other. This can take the form of transferring capital assets, ordering ongoing maintenance payments, or making orders in relation to pensions.
‘The Court will take a number of matters into account, including the assets, resources and needs of each party, the length of the marriage and the standard of living enjoyed. First consideration will be the welfare of any minor children of the parties. However, the position is markedly different where the two parties have been cohabiting. Where cohabiting parties break up, they have no automatic rights to make financial claims against each other; there is no such thing as ‘common law marriage’.’
Co-habitees who have purchased a property jointly, or perhaps where one party previously held the property in their own name and to which the other contributed in some way, may find that whilst they have a claim in property law, these are the same rights as any other two co-buyers would have. The fact that they may have been in a relationship and have lived together for however long makes little, if indeed any, difference.
Barbara adds, ‘There are many instances of women who have been in long term relationships with a partner and have raised children who have grown up. When the relationship breaks down, they find themselves with no financial security and no claims against their former partner. Although claims can be made where any children are still minors, any such claims are limited to providing for the children, rather than the other party to the relationship.’
For the party who is instigating proceedings, there is of course another key consideration; once they move out of the marital home, where will they live?
Insurance and investment specialists Aviva suggest in their recent research that, post separation, 51 per cent of those moving out of the marital home rent rather than buy, on average for 4.7 years.
However, if you’re considering purchasing another main residence straight away, there are some significant considerations to be aware of – particularly if you’re continuing to fund any expenditure around the family home, as well as raising a mortgage to buy your own new abode.
When it comes to applying for a mortgage in such situations, the lender involved will consider all committed expenditure when assessing affordability, and how much the applicant can reasonably borrow. For example, any child maintenance, spousal maintenance, payments towards another mortgage – such as on the existing family home – and any childcare costs or school fees will all be included in affordability calculations, as well as any outstanding debts and finance agreements.
All of these factors can have an impact on the amount that can be borrowed to fund the purchase of another main residence. Not all lenders will arrive at the same outcome in terms of how much they are prepared to lend, and some are more pragmatic in these situations than others. Needless to say, if you’re going to remain named on the deeds of your marital home – which will probably be the case if you’re going to continue paying towards any mortgage on the property – then this has to be declared as part of your mortgage application process.
It’s also important to be aware of any considerations around additional stamp duty. At the time of writing, an additional levy of 3 per cent is payable on second home purchases. If you’ll be named on the deeds of two properties, for example the marital home and your new main residence, this is likely to apply. There are instances where this can be legally avoided, but these are few and far between and very much depend on the individual circumstances involved, together with supporting paperwork from the Court. In other words, it’s probably best to budget for the ‘worst case’ scenario.
On the other hand, if you’re looking to buy out an ex-partner, you’ll need to consider if you can afford to do so. Not just from the perspective of being able to cover the monthly mortgage repayment, but actually in terms of raising the required amount of borrowing. The two factors can be mutually exclusive, so you need to take advice from either your current lender or a mortgage adviser as soon as is practically possible.
Although some lenders will take maintenance payments into account when considering affordability, not all do. You’ll also need to supply concrete proof, such as a court order, specifying both the amount of the payments you’ll be receiving and how long they are expected to last for, to support your mortgage application, together with evidence of any other income.
The point here is that just because you’re currently named on a mortgage together with your soon-to-be-ex, doesn’t mean you can automatically remove them and take on the whole mortgage in your own name. To all intents and purposes, you’ll need to re-apply to your lender in the same way you’d apply for a new mortgage, with full financial disclosure and proof of earnings to support your application.
One final note of caution; if you’re both named on the mortgage, whether you’re married or co-habiting, in the eyes of the lender you’re both ‘jointly and severally liable’. Meaning that if your partner has moved out and is refusing to pay their share – sadly not an uncommon occurrence – you’ll need to cover the entire mortgage payment in order to avoid falling into arrears, until such times either the mortgage and property is transferred over to one party and the other is released from their obligations, or you’ve sold it and redeemed the outstanding mortgage balance. In these situations, it’s best to contact your lender as soon as you possibly can in order to explain your circumstances, as they may be able to put a short-term arrangement in place to avoid you falling behind with mortgage payments.
It is of course very difficult to apply logic and practical thought process in the midst of a relationship breakdown. However, by contacting a family law specialist and financial adviser as early in the process as possible, you’re giving yourself a better chance of avoiding any ‘trip hazards’ well before they occur.
Photo credit: wutzkoh/Adobe Stock
Louisa Fletcher is a property expert