6 Ways to Separate Property When Getting Divorced
When it comes to divorce and property, often the most significant asset in a marriage is the family home.
Whether the matrimonial property is jointly owned or the deeds are just in the name of one spouse, both divorcing parties will normally have a certain degree of entitlement to any equity.
In this article, we will look at six different ways you can separate property in a divorce.
Unlike other types of matrimonial assets, the family home will often be crucial to the day-to-day lives of both spouses, even after they separate.
This is especially the case in today’s property market where costs of buying or renting as a single person are often prohibitive.
So, what are some of the most common ways in which divorcing couples deal with a property when it comes to agreeing on a financial settlement?
1. Sell the property
One of the most popular ways of separating the equity held in the marital home is to put it on the market and split the proceeds of a sale.
This is perhaps the most straightforward option and helps to achieve a clean break, whereby there are no ongoing obligations for either spouse towards each other beyond the date of their divorce.
A big advantage of selling the property is that any money released from the sale can be put down in the form of deposits on new mortgages, or else used for rental payments as both former spouses get back on their feet.
But selling up may not always be a good option. Recently purchased property that is quickly sold may actually result in a financial loss.
Furthermore, if the property has gone down in value since it was purchased, this will leave the owners in a state of negative equity – in which case it’s often best that they wait until the market improves before trying to sell up.
2. One party buys the other out
If either divorcing party wishes to remain living in the property, and have sufficient financial resources, they might offer to purchase any equity held by their former spouse. If there is still a mortgage on the property, this will necessitate reconfiguring the mortgage agreement (see below).
The advantage of one person buying the entirety of the property from their ex-partner is that, just as in the case of selling up, it results in a clean break.
Furthermore, it’s often a cheaper option compared to the costs associated with selling and buying a new home.
But many divorcing couples will struggle to raise the funds required to buy the whole property, particularly in the current buoyant housing market where housing prices keep rising year on year.
Also, the memories of a marital home where the marriage has failed will be off-putting to many people.
3. “Charge back”
A divorcing couple can agree for the legal and beneficial ownership of the property to be transferred to one of the spouses.
However, rather than a transfer of property ownership without any conditions attached, it is possible to register a charge against the title deeds which requires a portion of the proceeds of any future sale to be shared with the other former spouse.
This type of transfer of equity is commonly called a transfer with a “charge back”. A transfer with a charge back can be useful where one party wants the security and flexibility which comes with holding the legal title of the property, but their former spouse still wants to retain a share of the equity.
There will typically be a “trigger event” in the case of a transfer with charge back arrangement – such as the youngest child of the family reaching 18 years of age – in which case the property will need to be sold and the relevant portions of proceeds divided up.
4. 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 into the sole name of one party.
In effect, both former spouses will 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.
It’s also worth mentioning another order, similar to the Mesher order – called a Martin order.
The rules of a Martin order are essentially the same as Mesher order, except that it provides for an indefinite postponement of the sale of the property.
Although there will often still be certain trigger events, these are uncertain (eg remarriage or voluntarily vacating the property) and will often allow the former spouse to remain living in the property for the rest of their life.
5. Share the house
Certain modern marriages may end because a relationship has morphed into a friendship. Although the change in feelings between the couple might precipitate a divorce, if they continue to stay friends it can be possible for them to carry on living together.
If they have recently bought a house together, it will often be practical to continue to share the property, either temporarily or even indefinitely, as housemates and friends.
Although the decision to share a marital home after getting divorced will mean there is no clean break, it can be the most straightforward and least expensive option.
It may also be necessary if they are unable to obtain separate mortgages or pay individual rents.
6. Reconfigure existing mortgage
In the scenario where it is not possible for one party to buy their ex out, and where the property was purchased so recently that selling up is not a viable option, it might be prudent to continue with a joint mortgage, at least temporarily.
But if the divorcing couple intends to carry on paying into a joint mortgage, it may nevertheless be necessary to change the details of the mortgage in order to reflect the terms of a financial settlement.
One example of reconfiguring a mortgage may be to alter the share of the equity that is held by either spouse.
This could mean changing the co-ownership structure from that of “joint tenants” to one of “tenants in common”. It will be necessary to discuss any such intentions with the mortgage provider and/or a lawyer.
Final thoughts & conclusion
Separating a property as part of a divorce is never easy. There is no right or wrong way as it entirely depends on the individual circumstances of each couple.
When working out a fair divorce settlement, a family home will always need to be considered and separated accordingly.
If you would like help with having your property settlement formally drafted into a financial consent order, our solicitors can save you time, stress, and money.
Unlike high-street solicitors our services are fixed-fee, giving you peace of mind over the true cost of dealing with your property and finances when getting divorced.
Property Settlement Agreement – £399
This Clean Break Consent Order service provides you with a professionally drafted court order that documents to the court how you intend to split your property and other finances. The same agreement with a high-street firm can cost £2,000 or more.