Long term options for homeowners

It may be possible for the joint owners to come to an agreement about each party's long-term rights to the home without involving the courts. The obvious advantage of reaching an agreement rather than using the courts is that it is likely to be quicker, cheaper and offer more flexibility. This is the case regardless of whether or not the couple are divorcing or seeking a dissolution of a civil partnership.

Family mediation

Family mediation can help separating partners resolve disputes about children or financial matters out of court. It is a voluntary process where they can meet safely in the presence of an impartial and independent mediator to discuss disputes. It does not aim to help them get back together, but to help them manage their future better.

For more information see Gov.uk – Money and property when a relationship ends.

When there is a relationship breakdown, married couples and civil partners can make any type of agreement concerning what will happen to their home. Below are the most common types of agreement.

It may be the case that the couple have made an agreement clarifying their intentions in the event of a relationship breakdown when they began their relationship or bought their home. This would normally be in the form of a written and signed declaration, or statement, or a formal trust deed prepared by a solicitor.

It is possible for there to be a verbal agreement, although this will obviously be harder to prove in the event of a dispute.

Examples of agreements might be for the property to be sold and the proceeds divided in specified shares, or for one partner to agree to leave the property and for the other partner and the children to remain there for a specified length of time.

The couple may agree that one of them buys the other's share in the property and becomes the sole owner. This is done by a solicitor drawing up a deed of transfer of title from the two joint owners to one of them. The partner who is to become the sole owner may need to obtain a further mortgage to pay off the other partner's share. If there is a joint mortgage already, the lender's consent has to be given to the transfer.

One of the most straightforward agreements is where the joint owners agree to sell the property and divide the proceeds. It may be possible for the couple to agree what share each partner holds in the property. This could be done by looking at how the matrimonial court would divide the property in making a property adjustment order. Alternatively, it could be related to who has contributed a greater share of the mortgage payments or put up the money for the initial deposit when the property was purchased. The principles of resulting/implied or constructive trusts may be used to establish the shares in which the property is held. If there is any dispute about establishing and quantifying the shares, then this would have to be resolved by the courts. These property law principles apply equally to married couples, civil partners and cohabiting joint owners.

With effect from 22 April 2014, there is a single Family Court for England and Wales, bringing together the three previous tiers of the family courts; the High Court, county court and magistrates' court. The Family Court, with very limited exceptions, will deal with all family cases, including applications for protection against domestic violence and matters relating to the matrimonial or family home.[1]

England and Wales is divided into geographical areas, each of which has a Designated Family Centre, which is the principal family court location for each area and to which all applications should be made. In practice, the Family Court can sit at any of the local county courts and magistrates' courts.

Where it is not possible for the couple to reach an agreement about the long-term future of the property, or if it is not practical to seek one in the first place, for example if there is domestic violence or one partner has disappeared, the court can make the decision. Long-term property rights may be settled using matrimonial/family law or property law.

In matrimonial/family law, the courts have wide powers to reallocate or transfer ownership of property regardless of legal ownership or beneficial interests, ie the courts have the power to adjust property rights. In property law, the courts can adjudicate where there is a dispute over who owns what proportion of the property or grant an order for sale of jointly owned property.

Where the couple is divorcing or applying for a dissolution of a civil partnership or seeking a judicial separation, they are most likely to use the Matrimonial Causes Act 1973 to settle their long-term property rights, although they also have the option of using the remedies available to couples who are not divorcing or applying for a dissolution of a civil partnership under the Trusts of Land and Appointment of Trustees Act 1996 and the Married Women's Property Act 1882 (see property transfers for non-divorcing couples and couples not seeking dissolution of civil partnerships, below). Where there are children, either partner may apply for a transfer of ownership in the interests of a child under the Children Act 1989.

Where a couple are taking proceedings for divorce, dissolution of civil partnership, judicial separation or nullity under the Matrimonial Causes Act 1973, ownership of property can be transferred by applying for a property adjustment order in conjunction with the proceedings.[2] Where an application for a property adjustment order is made, the court can make one or more of the following orders:

• for property to be transferred to either spouse or civil partner, any 'child of the family' (see Children Act transfers, below) or to a specified person for the benefit of the child

• for property to be settled for the benefit of the other spouse or civil partner or any children of the family

• for any pre- or post-nuptial settlement to be varied, eg property left to one party in a will

• for reduction or extinction of an interest in a nuptial settlement, ie where there has been a marriage or civil partnership settlement, the court can wipe out one party's interest even though it gives no benefit to either party or a child of the family.

The person filing the divorce petition or dissolution of the civil partnership has to indicate if, at some stage, s/he intends to apply for any finance or property to be made over to her/him from the other spouse or civil partner.[3] This is usually known as applying for 'relief'. If s/he does, this must be followed up by a separate application. If the spouse or civil partner does not give notice at this time but subsequently decides to make a claim, s/he will have to get permission from the court to make the application.[4]

The application can be made before or after the decree absolute or dissolution of civil partnership and until remarriage or entering into a new civil partnership. The court may make an order after remarriage, provided the application was made before the remarriage or new civil partnership.[5]

When a property adjustment order takes effect

If the petition is for divorce, dissolution of civil partnership or nullity, the property adjustment order cannot take effect until decree absolute has been pronounced.[6] If the petition is for judicial separation, the order may take effect once decree has been pronounced.

Meaning of 'property'

The courts may order a transfer of any property to which a spouse or civil partner is entitled. 'Property' includes houses, cars, a business, the contents of the home, some tenancies and any other assets of either party.[7]

Criteria for determining what orders are made

In deciding who gets what, the courts need not reflect how the property is held or was acquired, but must take into account all the circumstances of the matrimonial situation.[8]

The courts must have regard to the following matters:[9]

• the welfare of any child of the family under 18. However, note that case law has also shown that the courts are entitled to consider local authority rehousing obligations to either spouse or civil partner[10]

• income, earning capacity, property and financial resources of the parties

• financial needs, obligations and responsibilities each party has or is likely to have in the future

• standard of living during the marriage or civil partnership

• age of parties and duration of marriage or civil partnership

• any physical and mental disabilities of either party

• contributions (and future contributions) to the welfare of the family

• benefits lost on divorce or dissolution of the civil partnership, including pension rights

• conduct if unjust to disregard it, for example, violent physical conduct.

The court also has the power to order payment of lump sums or periodical payments from one spouse or civil partner to another (ie maintenance).

Types of long-term orders

There are many possible variations of the property adjustment order, and the courts have considerable discretion in deciding what will produce the best outcome. Decisions about property are, in many cases, linked with financial settlements and considered in conjunction with any maintenance payments to the spouse or civil partner. The courts will normally try to secure a home for at least one of the parties and, if possible, both.

The more common types of order include:

• sale and division of proceeds: a sale may be agreed between the spouses or civil partners as part of their divorce settlement, and be ratified by the court. It is usually referred to as a 'consent order'. If there is no agreement, the court can determine the shares to be held and make an order for sale. This is more likely where no dependent children are involved. The court may order a sale if both parties could repurchase or, alternatively, if neither could afford to remain in the matrimonial home. The court should not order a sale, nor a partner consent to a sale, if the parent who is to care for the children would be made homeless

• deferred interest orders: the court can postpone the sale of the home until a trigger event occurs, such as the youngest child reaching the age of 18[11] or until remarriage, death or cohabitation of the parent who is caring for the children. This is also known as a 'Mesher' order, named after a case where the court would not order a sale which would make the wife and children homeless.[12] A 'Martin' order, which also defers a sale and allows one party to remain in the home, can be made where there are no children.

• transfer from one party to another: this can happen where one party buys the other out, or places a charge on the property for a specified share of the proceeds that will be repaid when the property is sold. The court decides how much should be paid, determinable by section 25 criteria (see criteria for determining what orders are made, above) and not by what legal or equitable share each person has in the property.

The Matrimonial Causes Act 1973 also contains provisions that require the courts to consider whether it is appropriate to make the type of order that has become known as a 'clean break order', ie an order that emphasises the need for both parties to do everything possible to become independent:[13]

• the court must consider whether it is appropriate to make an order that will mean that the financial obligations of each party towards the other will be terminated as soon as possible after divorce

• more specifically, if the court makes a periodical payments order (maintenance), it must consider whether it should make it only for so long as to allow the partner to adjust without undue hardship, ie making a maintenance order for a specific limited period. An application for variation is always possible whilst a maintenance order is in existence

• if a party applies for a maintenance order, the court may dismiss the application and rule that no further applications can be made. This is in order to free a spouse or civil partner from any future claim for financial support in years to come.

When clean break orders are made

Clean break orders are most likely to be made:

• where the couple have no children

• where the marriage is of comparatively short duration between a couple who both have income or earning capacity

• where there is an adequate amount of capital for division in longer marriages.

Child maintenance and clean breaks

If the Child Support Agency is involved, either because the 'caring partner' is on benefit, or as a result of a voluntary application, the powers under the Child Support Act allow the Agency to determine the amount payable for child maintenance according to its own set formula. This will override any contractual amount that a couple may have agreed to.[14] The formula contains an amount for maintenance of the caring parent regardless of any 'clean break' settlement that may have already been made.

In some situations, couples will be able to get help with their legal costs through the legal aid scheme. Even where someone is legally aided, the legal aid has to be repaid out of any settlement over £3,000. This is known as the 'statutory charge'. If the settlement is a lump sum, the statutory charge must normally be paid immediately, unless it is money towards buying a new home, in which case it must be used for that purpose within a year of the order or agreement. Where the settlement takes the form of property, the statutory charge will be registered as a charge against the property and will accrue interest. It will normally be repayable when the property is sold.

Where a married couple or civil partners separate but do not wish to divorce or dissolve their civil partnership, they cannot use the provisions of the Matrimonial Causes Act 1973. If no agreement can be made, they can, however, use the provisions of the Trusts of Land and Appointment of Trustees Act 1996 and the Married Women's Property Act 1882. In these cases, the shares in which the beneficial interest in the property is held will be of relevance and the court has no power to alter those shares.

Where there are children, the Children Act 1989 may be used. The criteria the court uses are similar to those under the Matrimonial Causes Act 1973, but only relate to the child's needs and not those of the parents. As this is family law, rather than property law, the courts can alter existing property rights or grant a right where one did not exist, ie they can adjust the amount or nature of each partner's beneficial interest.

Trusts of Land and Appointment of Trustees Act

Where there is a sole owner and a non-owning spouse or civil partner with a beneficial interest, either party can make an application to the court for a declaration of interests and an order directing or preventing sale. The application is made in the county court or the High Court under section 14 of the Trusts of Land and Appointment of Trustees Act 1996.

The court's powers are broad and extend to ordering an immediate sale, postponing a sale or making any kind of order relating to the property. There is no longer a presumption that the property must be sold. For example, the court might make an order for the property to be sold when the children reach 18, when one partner dies or after a certain period of time. When deciding whether to make an order under the Trusts of Land and Appointment of Trustees Act 1996, the court must consider:

• the intentions of the person(s) who created the trust

• the purpose for which the property is held

• the welfare of any child under the age of 18 who occupies the home or might reasonably be expected to do so

• the interests of any secured creditor, eg a lender.

The court must also consider whether the original purpose for which the home was bought still exists, for example if it was to provide a family home for both the parents and the children for an indefinite period.[15] Where the original trust still exists, the court will not make an order that defeats it. The court cannot change property rights, ie adjust the amount or nature of each partner's beneficial interest.

Married Women's Property Act

Married couples or civil partners can use the Married Women's Property Act 1882 to obtain an order concerning the home. This is a summary procedure (ie the judge may make whatever order s/he thinks fit in respect of disputed property) but the principles on which her/his decision is based are still the principles of property law.

This procedure is usually quicker and can have significant advantages in terms of costs, as the Legal Aid Board has the discretion to postpone recovery of the statutory charge (the charge that it imposes on assets that have been recovered in order to cover the costs of legal aid) on dwelling houses, and there is a £3,000 exemption from the statutory charge on any money or property recovered. This exemption does not apply where the Trusts of Land and Appointment of Trustees Act 1996 is used.

Married couples may apply for a transfer of property from one parent to the other. The court can order a property transfer to a child or to the parent or guardian caring for the child if it is for the benefit of a 'child of the family'.[16] A child is a child of the family in relation to a couple where:

• s/he is the child of both of them or

• s/he has been treated by both of them as if s/he were their child.[17]

A child who has been placed with a couple as their foster child by a local authority or voluntary organisation, will not be a 'child of the family'.

Property can also be settled for the benefit of the child, for example, the family home may be kept for one partner's use until the children are 18 when it could be sold and the proceeds divided, or it could become the children's property.

The court must consider the following factors:

• income, earning capacity, property and other financial resources of both parties now and in the foreseeable future

• financial needs, obligations and responsibilities of both parties now and in the foreseeable future

• income, earning capacity, property and financial resources of the child

• any physical or mental disability of the child

• the manner in which the child was being, or was expected to be, educated or trained.[18]

As the transfer is meant to be solely for the child's benefit, the court must not consider matters that relate specifically to the parents' relationship, eg the length of their relationship or their age. As this is family law, rather than property law, the courts can change existing property rights or grant a right where one did not exist, ie they can adjust the amount or nature of each partner's beneficial interest.

Applications for a property transfer under the Children Act

Applications for Children Act property transfer orders may be made by a parent or guardian of a child or by anyone in whose favour a residence order is in force with respect to a child. However, the only adults to whom a transfer can be made are the parents for whom the child is a 'child of the family'.

Courts' use of powers to transfer owner-occupied property

This provision is still relatively little used, so it is not yet clear how it is working in practice. As the property settlement is intended to be for the benefit of the child rather than the partner, it may be that the courts are unwilling to order outright transfers of valuable property from one parent to another if this results in a disproportionate benefit to one partner. The courts are more likely to make orders granting rights to occupy the home until a child reaches a certain age, after which the property may be sold, or possibly settle property upon the child, ie when s/he comes of age. Alternatively, the threat of proceedings has in some cases been used as a lever to negotiate a better settlement.