Covid-19 and the value of the family home upon divorce
For many separating couples, the matrimonial home and its value is often the largest asset within the divorce proceedings. As both spouses will typically need to purchase new homes for themselves following divorce, it is therefore necessary to discover how much the marital home is worth, and how much each party will eventually receive as a result of the sale.
However, what happens when, during the midst of a divorce, something as ‘unprecedented’ as the coronavirus pandemic intervenes? How can you account for the knock on effect on property prices, both in the short and long term? If a valuation of the marital home has already been obtained during the proceedings, is it now safe to rely upon this?
Evaluating your options
Choosing to get a new valuation will inevitably result in additional costs and further delays. But would this still be preferable to carrying on regardless with the original valuation, and subsequently finding that careful negotiations have come to nought, as one party can no longer re-house themselves due to a significant drop in value?
The effect of the pandemic on house valuations is difficult to anticipate. Whilst you would expect the market to dip due to the economic ramifications of the pandemic, evidence suggests that lockdown has led to a greater demand for certain larger properties in more rural locations, which has ultimately increased such properties’ valuations.
Where one party within the divorce proceedings has agreed ‘buy out’ their spouse for a specific lump sum figure it may be appropriate to seek an updated report to see to what extent the earlier valuation may have been affected, if any, due to the pandemic. Doing so will ensure a level of equality stays between both parties throughout the proceedings.
On the other hand, if the property is to be sold, and if each party is to receive a set percentage of the sale proceeds, then the value of the property will ultimately be what someone is prepared to pay for it. In those circumstances, both parties will similarly bear the risk and/or share the rewards of a volatile property market.
Where a substantial change in valuation has the ability to impact upon whether a party will actually be able to re-house themselves with their agreed proportion of the sale proceeds or not however, it should still be possible to resolve such an issue with careful drafting of an appropriate clause within a financial agreement/Consent Order, so as to provide the disadvantaged spouse with a greater share, or fixed sum, in the event of a substantial post-Covid valuation downturn.
If you are going through a divorce/separation and require some advice or assistance in resolving your associated financial matters please contact us, and our friendly and experienced team will be more than happy to help.< < back to latest news