As an adult, one of the biggest financial steps people take is to step onto the property ladder by buying a house. Another important step for many is to build a life and future with their partner, which may include making the decision to get married or form a civil partnership. When a couple marry or become civil partners, they have shared ideas about a future and make decisions together including where to live, what type of property to buy and how to finance that purchase, however what happens if the marriage or civil partnership ends? In this article we look specifically at what happens to property in a divorce or dissolution.
Today, buying a house is considered a challenge. In order to buy a house, you need a deposit saved in cash, and you need to secure a mortgage by meeting the specific lending criteria of a particular mortgage lender. Some people are lucky to benefit from inherited or gifted money from family members, however committing financially to a house purchase is a huge decision for everyone. When in a long-term relationship, whilst it is no less an important decision and commitment, buying a house can be financially slightly easier when combining finances such as saved deposits and meeting mortgage lending criteria. Some couples are in situations where one or both partners own their own house independently before deciding to combine assets and buy a property together to enable them to grow their family. In addition, depending on the finances of each couple and length of the relationship, some couples acquire more than one property.
What is a divorce or dissolution?
The Cambridge English Dictionary defines divorce as “an official or legal process to end a marriage”1, and a dissolution as “the act or process of ending an official legal agreement”2. Putting aside the emotional upheaval of a divorce or dissolution for a moment, there are a number of important financial decisions that must be made by the former couple involved.
Ultimately, an agreement must be reached on how to split finances and shared assets. In an ideal world, this agreement will be reached amicably and by fair negotiation on both sides. Divorce and dissolution are sadly, not always amicable and where an agreement cannot be reached, a couple may seek the help of a Family Solicitor, Mediation or finally a decision by Court.
We own a property, what are our options?
There are several options open to couples deciding to divorce or dissolve a civil partnership when it comes to shared property.
- You can agree to sell the property and move out, pay off any existing mortgage, splitting equity and moving on to separate properties. You will of course need house selling solicitors to assist you with this part of the seperation.
- You can continue to pay the existing mortgage between you whilst one party remains in the property. This is often preferable where children are involved and often requires a very specific plan or Order for the property beyond a certain defined time period
- One partner can buy the other out and retain the property in their sole name.
How is property in a divorce split?
It would be easy to assume that a property is split on a 50/50 basis or that a property owned in a sole name would remain the property of that individual following a divorce or dissolution, however it is unfortunately not as simple as that.
In UK Law, marriage and civil partnership are seen as a partnership with both partners contributing towards this partnership including property. Even where property is owned in one name, individual circumstances are considered, such as couples having differing earning potentials, one may have had a financial advantage over the other such as inherited funds and one partner may have given up work or reduced their working hours to care for children, one partner may have taken responsibility for the mortgage, whilst the other takes responsibility for bills or other shared expenses.
The share that each individual is entitled to varies depending on a number of factors such as:
- Income and earning potential
- Debts
- Individual financial resources and responsibilities
- Property value
- Individual age
- Length of marriage or civil partnership
- Individual contribution to the partnership
- Any children of the partnership
This is where Family Solicitors play a role. Employing an experienced family solicitor can help in deciding a fair split. The solicitor will take into consideration all of the above factors and act as an independent eye in deciding what is fair. They will also mediate a balanced negotiation where any conflict lies.
What is the difference between a legal and beneficial interest?
When considering property ownership and financial benefit of the property, there are two types of main interest one can have in a property.
A legal interest or ownership is one registered at the Land Registry on the title deeds held for the property. The person or people with a legal interest are considered the legal owner(s) of the property and have the right to sell or transfer the property.
A beneficial interest or ownership is where an individual is not named on the property deeds but has certain rights to the property, such as right to reside in the property, income from the property and/or a share of the equity held in the property. This is also known as an equitable interest.
Where a property is held in both names, then both individuals have legal ownership and a legal right to the property. Where a property is held in only one name, then it will be the role of the Family solicitor acting for the individual with the beneficial interest in the property to evidence their equitable interest.
What happens to the mortgage on a property in a divorce?
Where a property has a mortgage charged secured against it, repayment of the mortgage is the responsibility of both partners, even if one has moved out of the property. These payments must be made until such time that the property is sold or transferred to one partner and a new mortgage product taken out in a sole name. Despite any separation, you remain financially linked until resolution and therefore refusing to pay the mortgage can damage the credit score of you both and can lead to repossession of the property. A mortgage lender may offer sympathetic options in a divorce or dissolution but these will only be short term and a longer-term permanent solution must be decided.
We have decided to sell, how is the sale handled?
Once an agreement is made, many couples apply to the courts for a Financial Order as part of the divorce or dissolution. This is a very defined “clean break” in a relationship and any financial liability on each other.
Where a property is held in joint names, or a court order in is place determining the conduct of a sale, both parties will be responsible for the sale and must work together to ensure the sale is smooth and any conveyancing formalities are carried out. Conveyancers will take instructions from both partners, ensure any mortgage is redeemed successfully and financial liability ended, and pay sale proceeds in accordance with the court order.
In Conclusion
It is very common to own property jointly in some form, with a spouse or civil partner. In the situation of a divorce or dissolution of a civil partnership, there are a number of important financial factors which must be determined agreed either between the couple or in some case, via a Court. If you have found yourself in such a situation, at Express Conveyancing we have experience of handling sales, transfers and refinancing of such properties with sensitivity and warmth, being understanding of individual circumstances. Get in touch with our experienced team today for a no obligation quotation and with any questions you have about the process or how we can help make this as stress-free as possible.
Disclaimer: The information provided in this blog is for general informational purposes only and is not intended to constitute legal advice. While we strive to ensure our content is helpful and accurate, it should not be relied upon as a substitute for professional legal guidance tailored to your specific circumstances. We accept no responsibility or liability for any loss or damage incurred as a result of relying on the information provided in this blog. If you require legal advice, we strongly recommend consulting a qualified professional.
2. https://dictionary.cambridge.org/dictionary/english/dissolution
