November 2009
One particularly noticeable effect of the current economic climate and reduction in house prices/saleability has been the introduction of the “pipes of peace” (a la Paul McCartney). Those of a certain age will recall this song and accompanying video highlighting the Christmas Day truce in the trenches of World War I to enable a football match to take place between the Germans and the Brits.
At the present time, we are increasingly seeing couples with houses that do have to be sold now sometimes holding on to them and continuing to live together under flags of an albeit frosty truce. They are hoping that house prices will pick up so they can recover any negative equity or otherwise the hope of a greater deposit for the houses they intend to purchase when at last they are able to move on. This has in part been caused by some mortgage providers requiring deposits of 15% or even 25% for the best mortgage deals.
Previously, pending a sale at an expected good price and in a buoyant, lively market, couples had been happy and certainly more comfortable if one of them had left the house pending completion of a sale, usually to enter private rented accommodation. This was seen as a short term fix to enable them to both get on with their lives and provide some space. Both would have their own accommodation costs in that the party remaining in situ would be expected to meet all the bills and mortgage costs (usually without contribution unless, as in the case of a married couple, it could be shown maintenance was required to preserve this asset).
However, a lack of overtime and reduced bonuses have made affordability of this option an issue. Not only that, but how fast are houses selling? The vacating party can find themselves living ‘at home’ with mum and dad twenty years after saying ‘never again’ for quite some time. A short interlude was never a problem but whilst the curfew may not be so severe as it was, it still feels a retrograde step.
On occasion, we are also seeing “neutral” bank accounts being created in the parties’ joint names which require joint signatures to access funds but which allow them both to move into cost effective private rented accommodation so freeing up the joint matrimonial home to be rented out to pay the mortgage instalments. Any balance on the account will fall to be divided later or utilised towards any other expenditure or rental voids.
In a depressed environment there are always options but perhaps the brief nature of the truce highlighted by Sir Paul demonstrates the difficulties.
As the saying goes, “A realist is what an optimist would refer to as a pessimist”. However, as a realist myself, I prefer to say, “You never truly know your partner until you separate from them”.
For any advice on separation agreements and financial settlements, contact Lee Marston, lee.marston@clough-willis.co.uk