What happens to property if you divorce?
UK law regards marriage as a partnership, and as such all assets acquired during the relationship are considered to be ‘marital assets’ and can potentially be divided between both parties following a divorce.
When it comes to divorce and property rights, the family home is often the most valuable asset in a marriage and subsequently what happens to property if you divorce often raises many questions.
In a financial settlement the division of assets is generally based on the needs of each person, so dividing property during a divorce is not always straight forward. As with other marital assets, any property should be divided between the husband or wife, even if only one individual contributed to its purchase or acquisition.
How to deal with assets & finances in divorce
When granting a divorce/dissolution, the court will consider all individual assets within the marriage, not just those that are owned jointly. The way in which these assets are to be split will initially depend on any agreement you and your spouse/civil partner have reached.
If you can’t agree on how your assets should be split you can try mediation, collaborative law or have your solicitor negotiate with your partner before going to court.
Divorce house split
There are several options for sharing the equity in a marital home between divorcing parties, just as there are for sharing savings & investments, pensions and business interests.
Figuring out the best solution for a divorce property settlement will depend on the specific circumstances of each case, for example the need to provide a family home for children.
This will generally require negotiation between both parties, but if you can agree upon the way you go about splitting equity after separation without legal representation it will allow for a more affordable and less acrimonious separation. Below is a list of 6 ways to separate property upon divorce.
Splitting property in divorce
When splitting property in divorce or a civil partnership in the UK, you and your ex-partner need to agree on how the house is divided. The rights each have to equity in the property will depend on a range of factors, but typically the matrimonial home will form part of the overall divorce settlement agreement – however this doesn’t necessarily mean it will be divided 50/50.
Unlike other matrimonial assets, the family home will be crucial to the day-to-day lives of both spouses, especially if there are children of the marriage. This is also the case in today’s property market where costs of buying or renting as a single person are often prohibitive.
So, what are the most common ways in which divorcing couples deal with a property when it comes to agreeing on a financial settlement?
- Sell the property
- One party buys the other out
- Charge back
- Mesher order
- Share the house
- Reconfigure existing mortgage
Common ways to separate property in a divorce
Whether the matrimonial property is jointly owned, or the deeds are just in the name of one spouse, both divorcing parties will have a degree of entitlement to any equity. These are the six most common ways you can separate property in a divorce.
- Sell the property The most popular way of separating the equity is to put the property on the market and split the proceeds of a sale. This is perhaps the most straightforward option to achieve a clean break, whereby there are no ongoing obligations for either spouse beyond their divorce. But selling up may not be a good option if recently purchased property has negative equity.
- One party buys the other out If either party wishes to remain living in the property and has sufficient resource they might offer to purchase any equity held by their former spouse – if there is a mortgage on the property this will necessitate reconfiguring the mortgage agreement (see below). The advantage of a buy-out is that it also results in a clean break and is often a cheaper option compared to selling up and buying a new home.
- Charge back You can agree for the legal and beneficial ownership of the property to be transferred to one spouse while also registering a charge against the title deeds which requires a portion of the proceeds of any future sale to be shared with the other spouse. There will typically be a “trigger event” to force a sale, such as the youngest child of the family reaching 18 years of age.
- Mesher order A Mesher order is similar to a charge back arrangement, except for the fact that the title deeds of the property are not transferred. Both former spouses continue to own a legal share in the property, but one party will be entitled to sole occupation until a trigger event occurs, at which point the property will be sold and the proceeds divided between the former couple. A Martin order is similar, except that it provides for an indefinite postponement of the sale of the property. There will often still be trigger events, but these are more uncertain, like remarriage or voluntarily vacating the property which often allow the occupier to remain living in the property for the rest of their life.
- Share the house Some marriages end because a relationship has morphed into a friendship. Though the change in feelings between the couple might lead to divorce, if they continue to stay friends it can be possible to continue living together. The decision to share a marital home after getting divorced does mean there is no financial clean break, but it may be necessary if both are unable to get separate mortgages or afford to pay individual rent. This can be the most straightforward and least expensive option and can be practical either temporarily or even indefinitely.
- Reconfigure existing mortgage In a scenario where it is not possible for one party to buy their ex out and where selling up is not a viable option, it may be prudent to continue with a joint mortgage, at least temporarily. But if you intend paying into a joint mortgage it may be necessary to change the details of the mortgage in order to reflect the terms of a financial settlement. Reconfiguring a mortgage may be to alter the share of the equity held by either spouse or it could mean changing the co-ownership structure from that of “joint tenants” to “tenants in common”*. Obviously it will be necessary to discuss any such intentions with the mortgage provider and/or a solicitor.
*What is the difference between Joint Tenancy and Tenants in Common? See FAQs below for a brief explanation.
Transfer property to spouse
The ‘transfer property to spouse’ option (Charge Back) is an alternative often seen as the best solution when there are children involved and one parent would prefer to continue living with them in the family home.
But separating a property as part of a divorce is never easy and there is no right or wrong way as it depends entirely on the individual circumstances for each couple.
Choosing to sell the property is best for some divorcing couples, while others may want to initiate a transfer of property ownership after divorce – from one spouse to another.
When you transfer all or part of your ownership of a property to someone else this is called a ‘transfer of equity’.
Because the matrimonial home is the largest asset in most divorce cases, the ‘transfer of equity’ (when a spouse is removed from the property title deeds) is a crucial step in most divorce settlements.
Transfer of equity is a legal process that formally adds or removes someone from a property title deeds and it’s use in divorce settlements usually involves removing one spouse. In a transfer of equity the property is not sold and at least one original owner remains on the title deeds.
It should be noted that if you decide to start a transfer of property ownership when there is still a mortgage on the property you will require the mortgage lender’s consent.
This is because if the mortgage approval had been based on both spouse’s salaries, the lender will need to agree to continue with the mortgage, possibly based on just one salary.
Property Settlement Agreement
A professionally drafted Property Settlement Agreement documents to the court how you intend to split your property and other finances (except pensions). This same service with a high-street solicitor can cost £2,000 or more.
We encourage every couple that gets a divorce through our services to obtain a financial consent order so that you can both move on with the confidence that no future claims can be made by either party.
Give us a call to speak to a member of our team in the strictest confidence. Or you can fill out our contact form and we’ll ring you back.
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- Fixed-fee includes VAT with no hidden extras
- Our solicitor will complete the forms for you and process them with the courts
- Covers the sale/transfer of property & includes a clean break order preventing future claims
What financial assets or clauses are included in this service?
This Clean Break Consent Order service includes our qualified family law solicitors drafting the agreement and filing your application with the court to ensure it becomes legally binding. You can include the assets listed below in your financial settlement agreement:
- Clean break – preventing any future claims
- The sale/transfer of any property
- Savings and/or Debt provisions
- The division of any personal belongings
- Child and/or Spousal maintenance
- Lump-sum payments
- Business assets or investments
If you are looking to also divide pensions as part of your financial settlement you will need our Solicitor Managed Consent Order service as pensions are not covered under this service.
Solicitor Managed Consent Order – £599
For just an extra £200 our solicitor will manage your entire Financial Consent Order for you from start-to-finish, including the drafting and filing of the consent order under a one-off fixed fee payment.