The recession had added complications to the messy business of breaking up, with the disposal of property and divorce settlements affected most, writes Caroline Madden
BREAKING UP has never been easy, but thanks to the recession it’s become a whole lot harder. Collapsing property prices and a widespread deterioration in people’s financial circumstances mean that it’s increasingly difficult for couples to go their separate ways.
At the height of the boom, many couples were able to sell the family house and comfortably afford to buy two other homes. Now, because of falling prices and stagnation in the property market, it is difficult, if not impossible, to realise enough from the sale of their home to adequately provide for both spouses.
So how are couples dealing with this problem? Muriel Walls, who leads the family law group at McCann Fitzgerald, has a number of clients who “may not be the happiest in the world” but their relationship is not completely dysfunctional. They’ve decided to “tread water for a while” rather than splitting up. However, there are many more cases where the marital situation is unbearable, recession or no recession.
“Sadly, if people’s relationships are so bad that they have to go their separate ways, whether the market is up or down, that reality just has to be dealt with. You can’t ignore it,” Walls says. Such couples are having to consider short-term, stop-gap solutions.
One possible temporary solution is that one spouse stays in the family home for perhaps two years or until the youngest child turns 18, the other moves into rented accommodation, and they reassess the situation at the end of that period. Clearly this isn’t ideal.
Walls has one client who is sharing rented accommodation after moving out of the family home he has lived in for years. “The finances don’t allow him to rent a place of his own,” she explains. It tough but it’s better than the alternative – moving back in with his parents. “I think a lot of parents have found older children coming back to live with them,” she says.
Families are coming to the rescue in other ways too. “If a parent is in a situation where they’re comfortable and their own investments haven’t been decimated by bank shares or suchlike, sometimes they can come in and aid,” Walls says. “They can maybe buy out a spouse at what some people would say is a bargain basement price, but it has the advantage of giving that other spouse cash to go and buy himself or herself [a home].”
In some cases couples decide to bite the bullet and sell their house at the best possible price rather than wait for the market to recover, on the basis that even though its value has dropped, so too has the cost of buying alternative accommodation.
Separating or divorcing couples have little choice but to settle for a less than perfect arrangement now, but what will happen when the economy eventually picks up or one party’s financial situation improves? Will estranged spouses come back looking for more? Yes, says Walls, and this is only fair. The deals being done at the moment “deal with the now”, but they’re not full and final solutions.
It would be unfair to draw up a final solution in the midst of a severe economic crisis, she says. In many cases, the husband agrees to move out of the family home until the market picks up and it can be sold for a better price. Until then, he is effectively getting nothing out of the arrangement, so it is only fair that the situation is reassessed down the line.
According to Barbara Smyth of the Legal Aid Board in the Wicklow Law Centre, the recession is also affecting existing divorce settlements, because people simply can’t afford to complete them. “People are re-entering court and saying, ‘Listen, this is just not doable. What do we do now?’” It’s very difficult to advise people in this sort of situation, she says, because the family law world has “been turned upside-down in the last year”.
It seems so recently that people were returning to the courts for improved settlements as investments and property values rose spectacularly.
Geoffrey Shannon, leading family law solicitor and author of Divorce Law Practice, agrees that the most significant trend over the past year is that people are going back to the courts seeking a review of their divorce order.
Are the courts sympathetic? Judges are acknowledging the impact of the credit crunch and are trying to factor it into their decisions. For example, if a property can’t be sold, the judge will consider other ways of properly providing for both parties.
What if one party can’t afford to continue paying maintenance to their ex-spouse or children? Can they negotiate it downwards? “Absolutely,” says Walls, explaining that the law is very clear on this: maintenance is always reviewable. “It’s reviewable up in good times; it’s reviewable down in bad times.”
If funds are tight, it’s best if the two parties can agree on a revised maintenance amount. This way they avoid spending money on lawyers and going through the court system again. However, if an agreement can’t be reached, they can go back to court and present evidence to a judge who will make a decision.
In fact, pretty much everything in a divorce order is potentially up for review, says Shannon, although there are a few notable exceptions. For example, a lump sum order cannot be varied unless it is payable by way of instalments. In the past, wealthy couples (or at least wealthy non-dependent spouses) were very favourably disposed towards once-off lump sum orders because they gave them as much of a “clean break” as is possible in an Irish context.
However, this strategy is now backfiring for non-dependent spouses whose financial situation has deteriorated in the meantime – as this type of order cannot be altered they can’t retrieve any of the once-off lump sum. “What seemed to be attractive in the era of unprecedented economic prosperity is now far less attractive,” says Shannon.
One positive trend emerging is that couples are more willing to consider alternative methods of reaching a settlement. For example, the collaborative family law approach, whereby both parties try to negotiate an agreement with the assistance of specially trained lawyers, is becoming increasingly popular.
“It’s interesting to see that, in a downturn, people are looking for different ways of resolving the issues and it makes absolute sense,” Walls says.
