New Year, New Start

18 Dec 2012

Couples often think of the New Year as a time to make a fresh start and sadly, can mean the ending of a relationship.

Before the economic landscape changed so drastically, divorcing couples found it relatively easy – financially speaking – to separate and move on with adequate provision.

House prices at their peak meant that many people had considerable equity in their properties: demand for buying and selling was such that if a relationship did come to an end, the property or properties could be put on the market for sale and be snapped up in a matter of months, giving both parties a cash sum to use towards their next house.

Alternatively, if one person wanted to remain in the house and buy the other’s interest out, the flow of generous credit offered by the banks and building societies would very often enable them to do so: lenders would agree to extend mortgages without much persuasion, even for people on fairly low incomes.

For those who could not be released from an existing mortgage, it was possible to self-certify – to simply confirm to a lender that they could afford the repayments for a second mortgage, and off they went to buy a new house.

This meant that divorce solicitors could assist couples in structuring a new financial life after separation without too much difficulty.

Now, following the credit crunch, house prices have fallen and the lending policies of high street banks and building societies have become rigid and extremely risk-averse. Money purchase pension schemes (invested on the stock market) lost much of their value, reducing the amount available to share upon divorce.  People lost their jobs and faced long periods of unemployment, affecting everything from repayment of debt to child and spousal maintenance payments. Companies lost revenue and their share values dropped accordingly.

It is now much more difficult to sell the family home or obtain extra borrowing to buy out the other person’s share. Incomes are often so stretched that moving out into temporary rented accommodation become difficult or impossible.  More and more divorcing couples have to look to their parents for help in standing as a guarantor for remortgages, for example, or in putting up an adult child after they have left the family home.

For many couples, there is no easy “out” of this difficult situation because the money simply is not there to facilitate a smooth financial restructuring. Many have had to go on living together at home, albeit in separate rooms. This arrangement can be very difficult to navigate, given that feelings may run high as a result of the relationship ending.

Solicitors specialising in family matters can help to assist in this situation by helping to find a practical way to cope with the enforced cohabitation until such time as they can disentangle their financial arrangements. In some cases, formal Cohabitation Agreements have been used which schedule who can use the household facilities at certain times:  down to and including bathroom and kitchen usage, and the hours between which one can invite friends or family back to the home.

It is now all the more important that couples considering separation and divorce take advice from solicitors who can help them do the best that they can with what they have – and who will encourage the couple concerned to be as sensible and amicable as possible with each other.