News & Events
Downturn adds to divorce pain
4th October
2008
Efforts by many hundreds of couples across Wales to reach divorce settlements have been seriously affected by the downward spiral in house prices, one of the country's leading family lawyers has disclosed.
According to Suzanne Edwards, a partner in law firm Harding Evans, large numbers are being forced to remain under the same roof for long periods of time because they are unable to sell family home and because of increasing uncertainty in the housing market, including the value of the property at any point in time.
The valuation is usually a key component in any financial arrangement between the separating partners, representing usually their major asset. But house prices in Wales have been plummeting over recent months and there is no end in sight.
Based on their experiences, Ms. Edwards said that increasing numbers of couples are having to keep a close eye upon their settlement plans because the value of their property has dropped so much.
The Nationwide Building Society predicts house prices could fall by as much as 25 per cent from their peak. Indeed where proceedings are ongoing, the Court is often being invited to make Orders for a review of a previously agreed valuation of a property.
She said: "Since April there has been a really marked change. It wouldn't normally matter if the value was dropping only marginally but in the current conditions people are becoming very concerned are are looking for other solutions."
"We are coming across more and more cases of people having to stay under one roof. They can't afford to move out."
» Suzanne Edwards, Matrimonial Partner at Harding Evans
"We are coming across more and more cases of people having to stay under one roof. They can't afford to move out without realising their share of the equity in the property, and given that their relationship has broken down, staying on in the home can mean months or potentially years of misery waiting for a property to sell." she explained.
Ms Edwards, who has been a family lawyer for almost 30 years, said she witnessed similar problems during the lumber of the early 1990s. She said: "The house is usually the biggest component in a complex settlement which can include other assets such as pensions, investments and maintenance payments. If the value of that main component becoming extremely uncertain it can affect the whole package."
The advice she gives clients depends on their circumstances. In some cases the partner leaving the family home accepts a lower valuation to secure capital quickly and move on with their lives. The partner wishing to acquire the home hopes that the property will drop in order to improve their chances of raising a mortgage to buy out their partner.
Often a parent with care of children is working only part-time hours and depends on working tax credits to make ends meet. Prior to the credit crunch, some lending institutions would count working tax credits when calculating a person's mortgage-raising capacity, but in the changed financial market, that source of income is unlikely to be brought into account, this reducing the availability of a mortgage.
Even in cases where the couple agree to sell the house to a third party things can be complicated by the return of the controversial practice of "gazzundering" where a purchaser drops the offer price significantly just before completion of the sale. The only way forward for parties is to be realistic in their view as to the value of the property they are selling and of the property to be purchased.
Ms Edwards added: "Divorce is seldom a happy affair but current property market conditions are making it so much hard for people."