Date 17 March 2009
The last published divorce figures show that in 2007 the divorce rate in England and Wales fell to the lowest level for 26 years. The credit crunch appears to have reversed that trend with financial pressures leading to increasing numbers of people seeking a divorce.
Where separating spouses are unable to agree a financial settlement between them it will fall to the Court to determine what it considers to be a fair division of the matrimonial assets. In doing so the Court’s first concern is to meet the housing and income needs of the family with priority being given to the needs of the children
With many investments now much reduced in value and much lower rates of return it will in many more cases be necessary for there to be ongoing maintenance payments to the other spouse rather than maintenance being capitalised and there being a clean break. This may be true even where there are significant assets running to several million pounds.
A significant proportion of the family assets may take the form of equity in the former matrimonial home and this is likely to be difficult to release due to the current problems in the housing market. As a direct consequence it is becoming increasingly common for agreements and orders to provide that one of the spouses will remain living in the former matrimonial home until the property can be sold when the market improves.
Where this is the case any financial settlement will need to address who will pay the costs associated with the property until its sale and how the title to the property should be held by the spouses pending sale. The property could be transferred to one spouse with the other spouses share in the property being secured by way of a legal charge or could provide that both spouses will continue to own the property in defined shares.
A common problem where sale is delayed is that the lender will not release the spouse who will not be living in the property from the mortgage covenants. Prior to the credit crunch if the spouse remaining had undertaken to the court to indemnify the spouse leaving against the mortgage many lenders would ignore the liability when deciding how much they would lend to the spouse leaving. In the current economic crisis lenders are almost certain to take all of a borrowers existing liabilities into account. Lenders are also now insisting on substantially higher deposits which may be difficult to raise at a time when many investments have suffered significant reductions in value.
Many of those who already had reached agreement as to settlement and/or have an order settling their finances face a different type of problem. In many cases the spouses incomes and the value of matrimonial assets will have reduced dramatically making the agreement or order favour one party very significantly over the other.
Where the spouses have reached agreement but that agreement has not yet been made into an order the agreement will probably still be binding upon them. It is therefore essential to obtain legal advice before entering into any agreement and the earlier that advice is obtained the better.
If one spouse fails to abide by an agreement then the other can ask the court to make an order in the terms agreed. Once an order is made that order can be enforced through the courts.
Only in very unusual cases will the court refuse to make an order in the terms agreed, or set aside an existing order. Historically the Courts have refused to interfere but it is more likely that something can be done where there is not a sealed order and in these circumstances it is again vital to take early legal advice.
The spouse seeking to challenge an agreement or order has to show either that they were under duress, the other spouse made a material non-disclosure, that it was agreed or made only because of a mistake or that there has been a very significant new event since the agreement was reached or the order made. To the consternation of many a spouse a fall in the value of the former matrimonial home, fall in value of assets or loss of a job is unlikely to be considered to be a significant new event.
Even if one of these three factors is proven the court will only refuse to make an order or set an aside an existing order if it is clear that with hindsight the existing agreement or order would definitely not have been made.
Where there is an order for maintenance it is possible to reduce those payments by making an application to the Court for variation. Simply reducing the maintenance without returning to the Court is likely incur the wrath of the court and to result in an order to pay the other spouses costs in addition to any arrears.
If you have any questions or require further information please contact Andrew Nellist by email at andrew.nellist@salaw.com or on 01727 798000.
© SA LAW 2009
Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them. You are recommended to obtain specific advice in respect of individual cases.