Info & Advice

If we split up and are amicable, do we really need to formally agree financial arrangements between us?

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The simple answer to that is ‘Yes’ if you have a formalised relationship such as marriage.

If you do not have a formalised the relationship then the answer is ‘it depends’.

When married or people in a civil partnership separate, that could lead to one of a number of quite different scenarios:

The first distinctions are:

  • People remain living together
  • People stop living together

And the second distinctions are

  • They wish to remain in a relationship
  • They wish to separate and leave the relationship

What if we cannot afford to live separately?

People may want to end their relationship, but still live together for practical reasons. Reasons for not living apart could involve insufficient income to afford alternative accommodation or having negative equity.

What is negative equity?

The ‘equity’ in a home is the amount left over if it was sold and the costs of sale and mortgage repaid.    In times of rising house prices where people have not borrowed a further advice since buying their home, that figure is usually a positive number and there is money available to use to buy another home or homes.    When people have mortgage debt which is greater than the money that would be generated from a sale of the property, there is no money left over and the mortgage cannot be paid in full, that is ‘negative equity’.

When people can calculate that money would still be owed if they were to sell up, they sometimes decide to delay a sale in the hope that things improve, property prices rise or some other event allows them to find the money to avoid creating a debt by selling.

People with negative equity might want to delay selling and sometimes both owners remain living under the same roof, even though their relationship is no longer satisfactory and they want to separate.

That is a relationship breakdown and probably needs paperwork to regulate the arrangements.

Just because we live apart, are we considered ‘separated’?

People may split up for practical reasons and live apart without wanting to end their relationship – that could be because of work, health or other personal circumstances such as going to care for a relative in need.  Often a relative in an international family will go to another country to help – sometimes a parent will leave their spouse to go and help with the child-care of grandchildren, leaving their spouse to continue in their home and remain in a job based near that location.   A person who needs medical care might need to go into a nursing home without the marriage having broken down and so the couple are living apart, but not ‘separated’.

None of those scenarios involve a relationship breakdown and probably do not need any paperwork.

When would we be considered ‘separated’?

People stop living together and want to end the relationship is an obvious case of being ‘separated’.

If people want to end their relationship and for whatever reason continue to live under the same roof, they can still be ‘separated’ but for some legal reasons, they might want some paperwork as evidence that is the case.

The importance is the intention of the couple involved and whether the relationship has broken down.

We have split up – do we need to do anything formal about our finances?

In the case of people with a formalised relationship, there is a process to end that state of togetherness: divorce.

Divorce/Dissolution ends the status of a registered couple – married or in a civil partnership, but it does not automatically do anything about their assets or property: a jointly-owned house remains jointly-owned, savings in a joint bank or deposit account remains the property of both of them and so on.

Nothing like that changes as a result of divorce, even though rights that depend on the married status will cease.  A person who has divorced is single and in property law, if they own a house or flat with their ex-spouse, then they are treated the same as any other co-owners.

We have agreed what to do about our assets – what should we do about formalising it?

It is to be applauded that people have the maturity to sit down and agree what should happen about their assets when splitting up.

However, simply agreeing is not enough and people very often find that they have not covered everything in their private agreements.

Legal rights are not dismissed by entering a private agreement and can only be terminated by the family court.

To get an agreement formalised, people can ask the court to make a Consent Order which is a financial remedy order that has been presented to the court for approval.

How do I get a Consent Order?

The process of getting approval to an agreement and for it to be made into a court order (by consent) involves two main documents which are:

  • A draft consent order setting out all the terms that have been agreed
  • A Summary of Financial Circumstances form (D81) which is supposed to tell the judge all the information that would show whether the arrangement is fair.

Those two documents are the core of what the judge looks at to decide whether to make the Order or not.

The draft order says what has been agreed and is supposed to be worded so that the terms match the standard clauses which have been approved for use by the judges.  By having standard wording for clauses the judge can be sure that was has been agreed is something that the court has the power to order.   As part of  draft order, terms which are not in the power of the court to order appear in the recitals and agreements section which precedes the order itself as do Undertakings.

What is an undertaking?

An undertaking is a solemn promise made to the court.   The undertaking will contain some term that one or other person has agreed to do which the court could not order them to do and so it appears as a binding promise to the court.  It is a promise to the court not simply something agreed with the other person and to prevent that promise being bypassed or made less forceful, it is only the court that can cancel that promise.   In that way it has the same authority as the court order.

People have great flexibility as a result of putting agreements and making promises to the court rather than be restricted to the specific powers that the court has, which do not meet every eventuality.   Giving an undertaking requires that the person signs to say that they understand that the promise is serious and that breaking their promise can have serious consequences as it would be showing disrespect to the court – ‘contempt’ – which is punishable.

We used the standard clauses and completed the details of our financial circumstances on Form D81, so why has our deal not been approved?

Even if all the papers have been properly completed, that does not mean that the court must approve the deal.

Making a financial remedy order – even one by consent – requires that the judge is satisfied that what they are ordering is satisfactory and within the range of potentially fair settlements.

They are using discretion and basing their exercise of discretion/judgment on the evidence.

That evidence is set out on the D81 form, but that is not the whole story.

What must a judge think about when deciding whether to approve a deal?

The factors that a judge MUST take into account are set out in section 25 of the Matrimonial Causes Act 1973 (as amended)

Edited for easier reading, the pertinent parts are –

Matters to which court is to have regard in deciding how to exercise its powers [to make a financial order]

(1) It shall be the duty of the court in deciding whether to exercise its powers…and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.

(2) As regards the exercise of the powers of the court…in relation to a party to the marriage, the court shall in particular have regard to the following matters—

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;

(g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;

(h) in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit…which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

So a non-exhaustive list of what a judge must think about when considering approving the arrangements by making an order.   Note that at the outset it is ALL the circumstances that should be considered and additionally judges are reminded that the welfare – particularly housing – of children under the age of 18 years should be kept in mind.

A judge is entitled to ask questions to clarify any of those factors they must consider.

What are the most common reasons for an agreement not being approved?

After gaps in the information provided on Form D81 and questions to clarify the circumstances, when it comes to the draft order sought, the most common reasons solicitors encounter for not approving an agreement and making and order would include:

  • The order does not express the agreement in the standard clauses
  • The order includes terms that are not within the power of the court
  • The agreements and recitals include inappropriate information or comments
  • There are errors – transpositions or cross-referencing which is wrong
  • There are ambiguities and / or the terms are unclear
  • Somebody other than the people splitting up is included in the order
  • The deal is not close to 50/50
  • Housing needs are not met
  • Pensions funds are considerably different and no sharing or offsetting has been included
  • It is otherwise simply a bad solution

Any of the above can lead to a ‘refusal order’.

What should I do if the order is refused?

If the court issues a ‘refusal order’ then the reason / judges’ comment will be included so that the application can be rectified and reconsidered.

What you should do will depend on what reason for refusal has been given.

One of the most frustrating reasons that is sometimes given is ‘the Section 25 factors have not been applied’ which gives no clue as to what the judge thinks is unacceptable  and could, as a matter of speculation, be given from anything like the judge having an ‘instinct’ that something is wrong to the whole deal just looking as if it fails to meet the needs of one of the parties.   In the past, some judges failed to read a covering letter which explains the parties’ thinking and rejected seemingly ignorant of clarification that had been provided in advance outside of the order/form.

How can I get a refused order approved?

The reason for non-approval is important and the solution may be any one of the following:

  • Changing the wording
  • Moving terms in or out of the sections
  • Correcting errors
  • Clarifying the reasoning and why it meets the parties’ needs
  • Explaining factors which justify departure from 50/50
  • Re-negotiating the deal
  • Confirming how a weaker party has been treated fairly and why they accept the deal

You may need to take legal advice to address any of those judicial concerns and experienced family finance law solicitors should be able to assist, whichever of those solutions is needed.

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