The COVID-19 pandemic has created uncertainty for people across the world, including people going through a separation. Many are wondering if it is better to wait until the pandemic is over before negotiating a property settlement. Others are even wondering if it is possible to negotiate a property settlement when property inspections and auctions are prohibited.
Here are some of the ways that we are seeing COVID-19 impact family law property settlements:
Valuing assets
The first step in negotiating a property settlement is to identify all the assets and liabilities of the relationship. These include real property, vehicles, shares, bank accounts, loans, and superannuation. Separated couples have an obligation to one another to provide full and frank financial disclosure under the Family Law Rules 2004.
Valuations and/ appraisals should be obtained if there is a dispute between the parties regarding the value of assets. Depending on your position, it may be desirable to obtain independent property valuations in light of the uncertainty in the property market. Valuations obtained prior to March 2020 may not reflect current property prices. Similarly, the value of superannuation entitlements and shares may have changed.
Case Study:
Lea and Fran were in a de-facto relationship for 8 years and separated in January 2020. They own a property in their joint names. Lea wishes to retain the property but she will have to make a cash payment to ‘buy out’ Fran’s share. Lea and Fran obtained real estate appraisals of the property in February 2020. It may be in Lea’s interests to negotiate a property settlement while the value of the property is low and obtain an updated property valuation.
Living under the one roof
The pandemic has impacted incomes and job security across many households. Some separated couples have agreed to continue living under the one roof while separated in order to save on accommodation and household expenses.
Some separated couples have even agreed to wait until the market recovers before they sell their home, so that they can achieve the best purchase price possible.
Case Study:
Tim and Kate have recently separated but remain amicable. They have two children, Sally aged 5 and Molly aged 2. Tim and Kate have agreed to continue living together but in separate bedrooms. Tim is paying for all the household expenses. Tim and Kate have decided that they will continue living together under the one roof until the property market bounces back. They each intend to use their share of the sale proceeds to purchase a new home for themselves and the children.
Getting financial advice
Advice can be obtained from mortgage brokers and financial advisors to find out borrowing capacity and what can realistically be afforded in the current property market.
It may help to be proactive in getting advice prior to making an offers of settlement. A financial advisor is able to make recommendations about the mix of cash payment and superannuation split that would bring the most benefit to you in the short and long term.
Case Study:
Rose and Allan have decided to separate after 25 years of marriage. Rose spent many years out of the workforce to care for their three children when they were young. Allan receives a superannuation pension, but still offers consulting services from time to time. Allen wishes to retain the family home and Rose would like to ‘downsize’ now that the children live independently. She has found a townhouse that she would like to purchase, but she is not sure whether she can obtain a mortgage loan from a bank. It is unlikely that Rose will be able to find work due to the economy, her age, and years out of the workforce. However, Rose will be able to access her superannuation soon. She has made an appointment with a financial advisor and mortgage broker to discuss her options.
Next steps?
If you aren’t sure how best to negotiate a property settlement during COVID, book a free 10-min chat with Talya or Elaine, our family lawyers.