In many divorce settlements, it is impossible for the divorcing couple to both rehouse separately in purchased properties – two purchased homes cannot always be financially achieved from the one former family home and resources available from the marriage settlement.
In these circumstances, an option that the divorcing couple and Court may reach is for the home to be transferred to one of the parties. This might be the person who is the main carer of the children and who will remain residing there. This will usually mean that the person who moves out has to rent rather than buy a new home as they remain a mortgage holder on the former family home, which will limit their ability to obtain a separate mortgage for a new home purchase. It may be outside of the power of the parties and the Court to require a lender to release the leaving party from a joint mortgage on the former home. If so, usually, the remaining party will be required to undertake to discharge all the mortgage payments and to indemnify the leaving party against any liability under the mortgage, and also to use best endeavours to procure the leaving party’s release from the mortgage as soon as possible.
This week, the Supreme Court handed down judgment in the case of Birch v Birch, allowing the Wife to seek to be released from her undertaking to secure the Husband’s release from the mortgage on the former matrimonial home by 30 September 2012 or for the property to be sold in default.
In their divorce, they had achieved a consent order in July 2010 which noted the Husband’s agreement that he had no interest in the former matrimonial home and that the Husband should transfer to the Wife his legal and beneficial interest in the matrimonial home subject to the mortgage, so that the Wife could continue to live there with the two children of the family. The Wife gave undertakings as above and also specifically that if the Husband had not been released from his mortgage covenants by 30 September 2012, she would secure his release by placing the home on the market for sale and proceeding to sell it.
The Wife could not secure the Husband’s release from the mortgage by that date, but considered that to have to move home while the children were still at local schools would be gravely damaging to the children’s interests. The Wife therefore sought to postpone for 7 years until their son’s 18th birthday, her obligation to secure the Husband’s release from his covenants under the mortgage by sale of the home. The Husband argued that the Court did not have jurisdiction to vary the Wife’s undertaking in that it related to the original property adjustment order which could not be varied unless there were significant change of circumstances since the order was made.
In a detailed consideration of the Court’s powers to deal with this issue, the Supreme Court considered the Wife’s application should be remitted to the Court for urgent consideration and that a balance would need to be made between the welfare of the children and all the relevant circumstances including in particular, whether the Wife can establish a significant change of circumstances since her undertaking was given and whether, and if so to what extent, the Husband has suffered, and is likely to continue to suffer, prejudice by remaining liable under his mortgage covenants.
It was suggested that if the Court finds that the Husband has suffered, and/or would be likely to suffer, prejudice as a result of delay in selling the home, the Court might favour compensating him by asking the Wife to make provision for him out of the ultimate net proceeds as a condition of release. The Court’s decision on which of the parties will be “released” as they would each respectively wish, is awaited.
If you would like further information and advice on this issue please contact us, Anna Ferro by emailing firstname.lastname@example.org or call 01494 478612.