Separation and Interim Housing Needs

With the housing market currently flatlining following the last Budget, couples wanting to separate will face rehousing challenges.  There are options, though not all are easy.  It is helpful to consider how these options look when funds are tight and availability is limited:

1. Some couples may choose not to leave the family home and continue to cohabit until a financial solution is reached.  If safe to do so, the financial practicality of remaining under the same roof does avoid the need for an immediate move into two households with the inevitable cost this brings.  One of the couple may not be able to able to afford the mortgage alone and so the couple should not put themselves to financial hardship if this can be avoided.
2. If it is not possible or safe to remain under the same roof, one of the couple may choose to, or have to, leave. It is a common myth that leaving a joint property means walking away from the equity.  This is not true.  A joint property cannot be sold from under the couple by just one of the couple.  There need to be joint signatures, or no sale. Therefore, an individual should not remain in an unsafe environment believing they need to stay to hold on to their share of the equity.  If the house is solely owned, a matrimonial home rights notice, or restriction (if unmarried), should be put on the property by the departing person so that the property is not unilaterally sold by the owner.  This ensures that anyone who comes along to buy the property in the meantime will be warned of the non-owner’s financial interest and this will disrupt sale to the advantage of the non-owner.
3. Discussions with a mortgage company about taking a mortgage holiday or switching to interest-only payments may ease financial tensions in the interim.  These are only short-term measures and should always be weighed carefully against their impact on accrual of consequential interest.  If manageable, these types of arrangements can enable two households to co-exist in the short-term until final arrangements are made as to how finances should be resolved.  Such decisions should always be carefully considered with the benefit of financial advice.
4. A couple who are co-named on a mortgage should remember that they each remain jointly and severally liable for the mortgage.  This means that the mortgage company can pursue both or either for non-payment.  The contractual liability to the mortgage company does not automatically end simply because one person has left the home.  Where possible, it is sensible to try and agree how the mortgage will be paid before physical separation.  This avoids any later risk of foreclosure and a fire sale by the lender.
5. Once a household separates into two, one or both of the couple, if on lower income, may become eligible for enhanced state benefits such as child benefit, Universal Credit, council tax relief or housing benefit.  These should be explored to maximise entitlement because benefits can sometimes offer a helpful solution for separate housing.
6. It is often not possible for an individual to afford to cover a mortgage payment and meet child maintenance obligations when a couple are living apart.  Commonly, one has to be offset against the other in whole or part.  Mortgage payments can often be higher than a child maintenance assessment.  Where possible, the couple should try and agree which to prioritise, as it will often be towards the mortgage that payments will need to be directed in the interim.
7. Couples should be wary of selling a house ahead of a comprehensive agreement on how all assets are to be shared.  Whilst it is helpful to get rid of the liability of a large mortgage, if there is not agreement about to how to divide the equity the money will be held on account by the conveyancing solicitors.  Sale proceeds can only be shared upon mirror written instructions.  If one of the couple reneges before completion, the monies must be held if there is no other written agreement.  This can obviously cause problems with connected purchases or rentals. In the event of disagreement, the proceeds could be held in escrow for a considerable period of time. Early distribution of the equity can also scupper any chance to later offset claims against other assets, such as pensions or investments, and could limit options on division of these.  It is best to take legal advice early to understand the pros and cons before putting a house up for sale.

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