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Can we finalise our divorce before the house is sold?

7th April 2021 by Jonathan Talbot

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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?

Jonathan Talbot, who heads up the Family Law team with Laceys says ‘It is usual for agreements to be finalised before the matrimonial home is sold, and we can advise upon progressing the divorce with such an agreement in place.’

Sometimes 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, as it may lead to uncertainty over future housing needs being met if the sale is to be delayed 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 occupy or have access to the property and upon what terms as to for example the payment of an occupation rent – as in Derhalli above?

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 of occupation of the home. 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.

If you would like any further advice on family matters please contact either our Family department on 01202 755980 or j.talbot@laceyssolicitors.co.uk or our Mediation department on 01202 377993 or g.burden@laceyssolicitors.co.uk

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.