Do divorce settlements take into account falls in property values?

[Brendan Burgess]

A friend of mine reached a settlement 4 years ago, when there was €400k equity in the house. They agreed that she would get the house but would pay him his share of the equity - €200k - after 5 years when the kids had finished school. If she doesn't have the money, it was agreed that she would sell the house to pay him the money.

Since then, house prices have fallen and there is no equity left in the house. It's probably in negative equity.

I presume that the €200k is still due? The deal was for €200k and not for half the equity in 5 years' time.

Are courts making any allowances for the fall in property prices in such cases?

As a general point, I have been told that there is no such thing as a final settlement in an Irish divorce case and that a person can go back and ask for the agreement in general to be reviewed. This does not sound right to me.

Brendan

 

[kkelliher]

I assume it would depend on the type of settlement reached. If it was deemed fair and reasonable by the courts at the time of agreement, I assume it would be classed as a contract and as such any failure would follow as a breech of contract?

 

[csirl]

I assume it would depend on the type of settlement reached. If it was deemed fair and reasonable by the courts at the time of agreement, I assume it would be classed as a contract and as such any failure would follow as a breech of contract?

I assume the settlement was in the family law courts, so it would be breech of Court Order which is more serious than breech of contract. As with all these things, the devil is in the detail and it depends on the exact wording of the settlement - whether or not the pay-out is direct linked to whatever equity is in the house or whether or not the settlement simply says X will pay Y €200k.

As with most family law matters, either side can ask for the situation to be reviewed by the courts.

 

[Brendan Burgess]

As with most family law matters, either side can ask for the situation to be reviewed by the courts.

I wasn't aware of this. I had assumed that a divorce settlement was final although I had got the impression that a separation agreement was really just an interim agreement.

I could see why a review would be required if it transpired that one party had not disclosed all their assets. But if there is full disclosure, is there never finality to a divorce settlement? In what situations do the courts agree to review the settlement?

Would an agreement based on property values prompt a review? What would have happened if the price of the property had increased since the agreement. Could he have asked for a review to get more?

 

[onq]

I was once told by someone who claimed to know that a spouse can reach a settlement with a non-working spouse based on their current circumstances at that time.
That while such a settlement may be deemed at that time to be a "final settlement", the spouse had the right to come back years later looking for a revised judgment = more money.
This may only be fearful scuttlebutt, but I was told that was apparently the law at the time - this is going back more than ten years and no, if my other half is reading this, I wasn't thinking of divorce myself!

ONQ.

 

[Sunny]

This recent ruling might be of interest

[broken link removed]

Judgment
In divorce proceedings many years after a judicial separation with a “full and final settlement” clause, Mr Justice Abbott ordered that the husband sell a property to cover the nursing home costs of his former wife.

Referring to the requirement that the court should have regard to any prior settlement when making provision under the 1996 Divorce Act, he said that on a strict view and following the decision of Mr Justice Adrian Hardiman in WA -v- MA, given the wife had “thrashed” the assets she had acquired in the judicial separation, the case should be dealt with on the basis only of maintenance provision into the future.


However, he was not taking such a strict view for two reasons. The fact the husband now had such a valuable property portfolio may be attributed, in part, to the cost to the wife of foregoing her rights to maintenance payments and, secondly, he felt the wife should have some capital over and above the maintenance payments to hold out to her children the possibility that they may succeed to some part of her estate.


He said he was greatly moved by her apprehension of being confined to a nursing home without respite. Ordinarily it was close relatives who provided such diversion, often in the expectation they may get some recompense in a will. He was therefore dealing with the case on a need basis.
He took account of the fact the wife’s life expectancy might be longer than estimated, as the estimate was based on averages for those with her condition in the population.
...
The husband’s assets, after allowing for capital gains tax, were in the region of €1.1 million. He had a rental income of €3,550 and expenditure of approximately €2,410. He also had some earnings as a property facilitator.

Mr Justice Abbott said the husband’s surplus of income over expenditure would not be enough to provide for the maintenance of the wife in a nursing home. He ordered him to sell one of the Irish properties, worth €600,000, to cater for all contingencies for the wife’s care into the future, and to lodge €400,000 on deposit. He could only draw down the interest after Dirt tax, the capital to be available to meet the needs of the wife.


...



In addition, he ordered him to pay a lump sum of €60,000 to wife as a “cushion” and ultimately as an inducement to her family to provide her with care and diversion outside the nursing home. He acknowledged that the husband, now in his 60s, also suffered from poor health, as he had arthritis and might require nursing home care in the future. If this was not met by his income, it may require realisation of his capital.

The full judgment is on www.courts.ie

 

[j26]

This recent ruling might be of interest

[broken link removed]

Bizarre decision.

This bit does it for me
Per Abbot J. "I consider that the wife should, as the years go by, have some capital over and above mere maintenance so that she may be in a position to hold out to her children ... the possibility that they may succeed to some part of her estate by Deed or Will."

What do the (adult) kids have to do with it?

http://www.courts.ie/judgments.nsf/...1a597327c8093c448025784500586537?OpenDocument

 

[Brendan Burgess]

What do the (adult) kids have to do with it?

The judge made it clear :

Ordinarily it was close relatives who provided such diversion, often in the expectation they may get some recompense in a will.

So his children might look after her during her illness, because they might get a share of €400k left behind by her after she dies.

Despite the fact that she had already "thrashed" the value of the home and 4 acres she had inherited.

I know the above is only a summary, but it seems like a bizarre judgment

He said he was greatly moved by her apprehension of being confined to a nursing home without respite.

Should she not have thought of this when she was thrashing the value of her home?

It seems clear that any settlement should provide for maintenance and not just capital. As the wife can thrash the capital and then come back for more.

 

[lyonsie]

Friend of mine is going to court in 3 weeks time with just this senario. It will be interesting to see the outcome. Husband paid off outstanding mortgage at the time of divorce and she got 3 years to get €125K together to pay him his half of what the property was worth at the time. She has since got 'permission' to go back to court to see if this can be varied (in the current economic climate) as the house is not worth now, what it was valued at.

 

[Thirsty]

no such thing as a final settlement in an Irish divorce case and that a person can go back and ask for the agreement in general to be reviewed

There's a 'yes and no' answer to that question.

If you have either a Judicial Separation (JS) or Separation Agreement (SA); either of these documents can be reviewed/revised at either parties request when / if either party files for Divorce.

Once the Divorce is finalised provisions in regards to property/pensions etc., will not generally be overturned. However the obligation to maintain is never done away with and either party (if they do not remarry) can seek spousal maintenance at any time.