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In most divorces, what happens to the family home is a significant and emotionally charged decision. It’s often the most valuable asset, and the outcome can have a lasting impact on your future. Here’s a brief guide to the main options available.
Since every case is unique, there isn’t a single answer as to what happens with the family home – there are many possible outcomes. For those currently going through divorce, or thinking about their options, it helps to be prepared so that you can manage your expectations.
Here, we’ll explain all the possible options available when it comes to divorce and property, including the rights to property after separation, and who gets to stay in the home.
What happens to the family home?
When it comes to divorce, the family home can be divided and dealt with in many ways.
The family home is a shared asset between a married couple. This means that both parties will be equally entitled to it, and can even continue to live in the home while going through a divorce.
One of the main areas to address before assessing your options is the way in which the home is shared between both parties. The two most common ownership structures are joint tenants or tenants in common.
Joint Tenants:
Joint tenants hold the same amount of equity/ownership in the property as each other. This is the default option in many cases.
Tenants in Common:
With tenants in common, both parties will share a percentage of the home, such as 70/30, 40/60, or even 50/50.
During divorce, you and your spouse will be treated as though there is a 50/50 split if you are joint tenants. With tenants in common, the specified percentage shall be followed, which can lead to some complications in how the home is divided.
A lot of this will be handled in what is called a property settlement.
What is a property settlement?
A property settlement refers to the ways in which assets (like property) are divided and handled during a divorce. These do not need to be arranged at the time of the divorce, and can be delayed if needed.
Who gets the house in a divorce?
During divorce, no single party is entitled to the family home. If they wish to keep it, they will often need to negotiate their terms with their ex-spouse, which will usually involve a buyout or rental takeover.
What if we are renting?
With rental agreements, selling isn’t an option. However, both parties will still have equal entitlement to live in the family home. If one person wishes to live there after the divorce, they must assume full responsibility for rental payments.
What are your options?
There are two main options available to divorced couples when it comes to the family home. We will explore both below:
Selling or moving out of the marital home
If you own your home, the most obvious option during divorce is to sell it and split the proceeds accordingly. If one person wishes to buy out the other, this can also be explored.
Splitting the proceeds
When leaving the marital home, the sale proceeds are divided according to your settlement. They will be used first to repay any outstanding mortgage(s) and/or secured loans, along with paying the estate agent and conveyancing solicitors’ fees.
If there is any Capital Gains Tax to be paid, the proceeds of the sale will also be used to pay that. How the remaining proceeds of the sale are distributed will depend on the financial settlement agreement reached between the parties.
Timing the sale
Agreeing on when to sell can depend on market conditions or family circumstances. Sometimes, a buyout can be a quicker and smoother approach, while also avoiding any listing fees from estate agents.
Valuing the property
Determine the home’s market value for a fair buyout. You can either instruct estate agents to undertake market appraisal valuations of the property or instruct a chartered surveyor to undertake a valuation report.
You must obtain a valuation of the property from an estate agent or chartered surveyor, rather than simply estimating the value of the property, to ensure that the amount of equity in the property has been calculated fairly.
Getting a mortgage redemption figure
When calculating how much equity is in the property, you will need to obtain a recent mortgage redemption statement from your mortgage provider. The statement will likely include any early repayment charges/exit fees, which should be deducted when calculating how much equity is in the property.
Getting another mortgage
Before proposing to buy your spouse out of the property, you should ensure that you can get a new mortgage if your current provider will not allow you to take on the existing one in your sole name.
It is advisable to obtain a mortgage borrowing capacity report from a mortgage broker/advisor and even speak to the current mortgage provider to ascertain if they will allow your spouse to be released from the current mortgage.
Deducting notional costs of sale
You should also deduct notional costs of sale from the value of the property and outstanding mortgage when calculating the equity. As there are often significant costs when selling a property (such as conveyancing solicitor fees and estate agent fees), it is fair to deduct between 2%-3% of the property value from the calculation of equity.
Staying in or keeping the family home
Likewise, if one party wishes to stay in the family home, that too can be explored. Though, like with moving out or selling, there are some considerations to make.
Consider the children’s stability
Courts often prioritise keeping children in the home. The parties can agree to a ‘Mesher Order’ which allows a party to remain living in the property with the children until a determining event. Determining events can include:
- The children reaching the age of 18 years or ceasing their full-time secondary education, whichever is the latter.
- The death of either party
- The resident party’s remarriage or cohabitation with another person for a continuous period of more than three months
- The resident party’s failure to occupy the property as their primary residence
The property will only be placed on the open market for sale when the determining event has occurred. Usually, the resident party will be solely responsible for the mortgage repayments until the property is sold, so they must ensure that they can afford those.
Mesher Orders are not favoured by the Court, as they delay the parties obtaining their clean break. The non-resident party will also remain tied to the mortgage secured against the property, which could impact their ability to purchase a property for themselves.
Maintenance Costs
Before proposing that you remain living in the family home, you should also consider whether you can afford to pay the monthly household bills, as well as whether you can afford to be responsible for any unforeseen maintenance and repairs.
For trusted legal expertise, call Grant Stephens Family Law
Determining the fate of your family home requires careful legal and financial planning. A family law solicitor can guide you through your options and ensure the best outcome for you and your family. If you need legal advice about your family home, our teams in Cardiff and Swansea are here to help. Contact us today for expert support.
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