The new ‘no-fault’ divorce – should you wait to get the ball rolling…?

You may have heard that the government’s Divorce, Dissolution and Separation Act 2020, due to come into force in April 2022, will reform the divorce process to remove the concept of fault. The new legislation means that if both parties agree to a divorce, there won’t be a requirement for one party to blame the other for the breakdown of the marriage. It is intended to reduce conflict between parties, allowing couples to focus on the more important issues, such as their children, finances, and property. This change will also apply to civil partnership dissolution.

However, there are ways of starting divorce proceedings before the new legislation comes into effect in April 2022, without it being onerous on blame, so don’t fear that because the available grounds for divorce don’t currently include the label ‘no fault’, it means that you must go in with all guns blazing to get the divorce started.

Charlotte Gower, a member of our Family Law Team in Warwick, explains “Whilst the marriage must have irretrievably broken down in order for divorce proceedings to be started, there are currently five legally recognised reasons for the breakdown:

a. A party to the marriage has committed adultery and the other finds it intolerable to continue living together
b. A party has behaved in such a way that it would be unreasonable to expect the other to continue to live with the other spouse (“unreasonable behaviour”)
c. A party has deserted the other for a continuous period of two years or more.
d. The parties have lived separately for two years or more and the other spouse agrees to the proposed divorce
e. The parties have lived separately for five years or more, in which eventuality consent is not required

It is a common misconception that the Court will always take into account the reason for divorce, or the conduct of the parties, in making a financial Order. The basis for the divorce is not normally relevant to how financial matters are resolved. “Conduct”, as it is known, will only be considered if the Court considers it would be unfair to disregard it. So, even if the Petitioner uses, for example, ‘unreasonable behaviour’ for the ground for divorce, this does not usually have a bearing on the financial side of things.

If you want to separate or you are already separated and you want to sort out your financial separation, then you do need to have the divorce proceedings started in order to have your financial separation put into a legally binding Court Order and approved by the Court to formally finalise it. If you don’t get the agreement finalised in a Court Order, then you are leaving your claims against each other open.

We can draft the financial Court Order, called a ‘Consent Order’ for you after reviewing your wants and needs and potentially negotiating with the other party. This can then be filed with Court where a Judge will review and approve, so long as they believe it to be fair. You can do all of this by agreement without actually having to step foot inside a Court itself.

There are ways that the divorce can be achieved amicably without delay, and this means that you can go ahead and get your finances sorted and finalised sooner rather than later. We would recommend getting advice from one of our experienced Family Law Solicitors, where you will be able to discuss your divorce and financial separation and getting it all laid out in a Court Order, letting us guide you through the process and making it as stress-free as possible.”

For further information, please contact Charlotte Gower either by calling the Warwick Office or by emailing charlotte.gower@wadsworthslaw.co.uk.

 

Can we finalise our divorce before the house is sold?

For the majority of people, their most significant asset is the family home. So, it is not surprising that when it comes to dealing with the financial consequences surrounding divorce, questions about what will happen to the matrimonial home are usually top of the list.

In most cases the home will be dealt with in one of two ways – either it is transferred to one spouse, and the other spouse will receive a lump sum of money or an asset such as a pension pot or holiday home in exchange, or it is sold and both spouses receive a division of the sale proceeds.

Where a property has to be sold, external factors come into play, such as the property market, the economy, a pandemic, or tax incentives such as the stamp duty holiday. These can affect how quickly a house will be sold, and raise the question of whether a divorce can be finalised before a house is sold?

Rachel McLarney a Solicitor in the family law team with Wadsworths Solicitors in Tamworth and Warwick says ‘It is commonplace for agreements to be finalised before the matrimonial home is sold, and we can advise on things that you will need to consider in this scenario.’

Occasionally an agreement may be reached between spouses, or a court order made, stipulating that there will be a delay in selling the home until a certain event has occurred. This could be, for example, when the youngest child of the family reaches the age of 18 or finishes full-time education.

These types of agreement are increasingly less common, with most people preferring a clean break. The focus in this article is not on an intended delay to the sale, but on one where an unforeseen delay or obstacle occurs to prevent selling the home straight away. This is commonly due to the house being on the market, but without a purchaser being found.

Lessons from the case of Derhalli v Derhalli

If it is intended to sell the home, it is possible for you to proceed and finalise your divorce and financial division, however the recent case of Derhalli v Derhalli [2021] shows that some additional considerations must be taken.

In this case the husband and wife had reached an agreement over their matrimonial finances. Amongst other things, the agreement stipulated that Mrs Derhalli was to receive several million pounds upon the sale of the matrimonial home in West London, which was in the sole name of Mr Derhalli. The consent order was reached in 2016 but the house was not actually sold until 2019 due to a delay caused by the Brexit vote.

During these three years, Mrs Derhalli remained in the home and her ex-husband sought to recover a rent from her to cover this period. He argued that he should be entitled to £5,000 a month rent which amounted to around £600,000. Mrs Derhalli did not agree and argued that she was entitled to remain in the home until it was sold.

The Court of Appeal examined the consent order and found that there was nothing to prevent Mrs Derhalli remaining in the former matrimonial home until it was sold.

This case provides a cautionary tale to ensure that all eventualities are considered before entering a financial settlement on divorce, especially if the home has not yet been sold. The situation would have been different if a clause had been included in the agreement stipulating his wife must pay a rent if she continued to reside in the home. Both parties would also have saved extensive legal costs and time had the agreement stated what would happen in the event of the house sale being delayed.

Considerations when selling a matrimonial home after divorce

Not only will you want to consider who will reside in the property until sale, but you should also give some thought to other questions which may arise, such as:
• Who will pay the mortgage and rates?
• Who will maintain the property and cover the cost of any repairs?
• Who can have access to the property?

You should bear in mind that there can be other difficulties to consider if the house is to be vacant until it is sold, as it will still require a level of maintenance and heat and may be harder to sell if it falls into disrepair.

In addition, if like Mrs Derhalli you are not the legal owner of your home, we can take additional steps to secure your rights. This may involve us registering your interests at the Land Registry to help prevent your spouse selling or borrowing further against the house.

How we can help

Obtaining early legal advice on your divorce and finances is always important to ensure you obtain the best outcome possible for you and your family.
We are able to advise you on what needs to be included in your agreement should you wish to finalise matters prior to the matrimonial home, or any other assets, being sold.

We can also advise you on how you can sell the matrimonial home before you finalise any financial agreement should that option best suit you. This may be your preferred option if you have a buyer lined up and the housing market is uncertain.

If you sell before a financial agreement is reached, then the proceeds of sale will usually be held by agreement between solicitors pending finalisation by way of a consent order or court direction.

For further information, please contact Rachel McLarney in our family law team on 01926 493485 or email Rachel.mclarney@wadsworthslaw.co.uk.

Pension sharing in a divorce settlement

When couples separate and divorce, part of that process will involve dividing the assets from the marriage and creating two households out of one.

‘Dividing up cash, savings and the family home are relatively straightforward,’ says Rachel McLarney, family solicitor at Wadsworths Solicitors’ Warwick Office. ‘In contrast, pensions are the most complex asset to distribute, and can often be overlooked.’

Pensions can be shared just like any other marital asset. However, the share of the pension cannot usually be made available immediately, but will provide some pension benefit in the future. In addition, there are a variety of types of pension schemes with differing approaches to calculating the eventual pension payments.

One key difference arises depending on whether a scheme is based upon defined contributions, for example, a private pension into which a set amount per month is paid into the fund. Or a defined benefit scheme, for example, a final salary pension scheme), which is calculated by a formula based on the earnings history, years of service and age, rather than depending directly on individual investment returns.

Alternatively, experienced investors or company directors may have a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) which might include a portfolio of assets such as commercial property, woodland, shares and business investments.

It is perfectly possible for a couple to have pension funds of the same size but differing predicted monthly payments, even if they both work in the public sector.

Valuing the pension

The starting point is to contact your pension provider to request an up-to-date valuation of your pension or pensions – one is required for each pension you have. This is straightforward and a telephone call to your pension provider is usually sufficient. You will then receive a written valuation (or CEV) in respect of the pension, which says what the pension fund is currently worth and your expected pension payments. It can take some time to obtain this written valuation, which unfortunately can delay matters if parties are unaware.

For most private pensions, that valuation will usually be sufficient to provide accurate information to allow you to determine long-term arrangements. However, the picture is far from straightforward for SIPPs, SSASs and defined benefit public sector or armed forces pension schemes.

In these cases, the CEV may not be a true valuation of the pension fund. This is not because of anything untoward, it is simply to do with how the calculations are made, and the CEV provided may be lower than the actual value of the pension.

This can arise for a number of reasons, as demonstrated in the following scenarios:

• If the defined benefit is calculated based upon length of service of the serving spouse, the difference can be significant. For example, where the wife is a serving police officer who has 24 years and 364 days service, her pension provider says she has a CEV of £250,000. However, 24 hours later, when she has attained 25 years’ service, that pension may be worth £350,000.
• Where the pension fund includes property investments, values may change significantly particularly if planning permission for development is obtained. An acre of agricultural land may be worth £20,000 today, but with planning permission for a solar farm or a business park, its value could increase tenfold.

The benefit of an actuarial valuation

A pensions actuary will be able to provide an accurate valuation of the pension fund and expected payments. Unfortunately, an actuary’s report can be expensive, and often couples are put off by the cost and feel that the size of the pension does not justify the expense.

However, as can be seen in the example above, the true value of a pension can be significantly higher than you might initially be led to believe.

Can I claim against a pension that is already in payment?

Yes! Just because your spouse is already receiving their pension, it does not mean that the pension fund cannot be shared. However, it may be necessary to obtain an actuarial report to assist with calculating the appropriate percentage split.

What about state pensions?

It is possible in certain circumstances to have a pension sharing order against your spouse’s state pension – this might be particularly relevant if one party has not worked sufficiently to build up their NI contributions and so is not eligible for the full amount of the state pension.

Offsetting

In some cases, it might be preferable to keep the pension intact and provide one party with a larger capital sum.

For example, when one person earns little, they might struggle to raise a mortgage to buy a house. If the higher earner has a large pension pot, they might prefer to keep the whole of the pension and (subject to appropriate valuations) give their spouse more capital in exchange. This is known as offsetting; however, pensions and capital cannot be compared on a pound-for-pound basis.

As can be seen, pension calculations are complex, but your financial security in your old age may be at stake and so it is vitally important to seek legal advice from a solicitor who will be able to explain to you in more detail about how to share any pensions and how to obtain accurate valuations.

For further information, please contact either Rachel McLarney or Louise Dawson in the Family Team on 01926 493485 or email rachel.mclarney@wadsworthslaw.co.uk or louise.dawson@wadsworthslaw.co.uk.