Whether to sell your property before a divorce settlement depends on your circumstance because it has pros and cons in the UK. Much will depend on the details of your case. Selling your property before your divorce is settled can be beneficial if you both agree to sell, and you need access to the money. On the other hand, selling assets before a divorce can lead to a dispute if the court has not issued an enforceable Consent Order (i.e. divorce settlement).
Pros of selling marital property before divorce in the UK
In some scenarios, it can make strong sense to sell marital property and assets before finalising a divorce settlement. Doing so can free up much-needed cash that you may need to fund the next stage of your life (e.g. put a deposit on a new home for you and your child). This works well if you can both agree to sell the property and split the proceeds or if one party buys the other out.
Another reason to sell marital property before reaching a divorce settlement is that it can make splitting assets easier. After all, with certain property (e.g. the family home) sold, there is less in the pot to split in the divorce settlement.
Cons of selling marital property before divorce in the UK
There are several strong reasons why selling marital property before divorce in the UK has its downsides, including:
- No Consent Order in place
- Potential for disputes
- Hiding assets risks an unfavourable divorce settlement
- Tax consequences
- The market conditions may not be favourable
- Loss of stability
No Consent Order
Making the important decision to sell marital assets such as your home before a Consent Order is in place is risky because the other party may decide to change their mind at any time. If there is no legal agreement in writing stating that the separating parties agree to sell the family home and split the assets, there is nothing to stop one party from pulling out of the arrangement. Remember, Consent Orders are legally enforceable and can be used by the courts to compel both parties to go through with any agreement reached; otherwise, legal action can be taken. So, waiting until you have a settlement gives you added legal protection.
Potential for disputes
Arguments may arise if one party want to sell assets and the other does not, or they don’t agree to an aspect of the sale, such as the asking price, when to sell and how the property should be marketed.
Hiding assets
If one party tries to sell a marital asset, such as the family home, without the knowledge or agreement of the other party, it may look like they are trying to hide the true extent of their worth. Remember, you are both under a legal obligation when completing Form E to make a full and frank disclosure of your financial position. Any attempt to hide assets in a divorce may be viewed negatively by the family court judge, and a higher proportion of the marital assets may be awarded to the other party.
Loss of stability
The reality is that selling your family home before a divorce settlement is reached can add to the already high levels of stress, especially for those who have to move out and find a new place to live. Waiting until a divorce settlement has been agreed upon and a Consent Order has been issued (if the courts decide on the final settlement) allows time for matters to settle before moving on. Selling the marital home early in the divorce process can also add to the uncertainty and anxiety felt by any children from the relationship.
Inability to move on
Not selling your marital home now may make it difficult for you to move on if you do not have the financial resources to place a deposit on a new home or a rental property.
Tax consequences
It is important to bear in mind that selling your family home before your divorce is settled can result in adverse tax consequences. You may be liable for capital gains tax on any profit made, and this will then reduce the amount available to you overall.
The market conditions may not be favourable
Finally, it is important to consider that selling now may not yield the best sale price for your property. This will very much depend on the timing of your property sale when it is sold, and the market conditions at the time.
It can be extremely difficult to decide whether to sell the family property and other assets before a divorce settlement is reached. It is always advisable to seek legal advice before selling marital property prior to a divorce settlement to understand whether it could be beneficial for you or not. Please contact our experienced family law team to discuss your plans. We will discuss your case and advise you and your children on the best way forward.
If your wife or husband wants to sell assets before the divorce
If your wife or husband is trying to sell your marital assets without coming to an agreement with you first, your family law solicitor can apply for a Section 37 ‘freezing’ injunction order to prevent the sale or even a Mesher order from deferring the sale until an agreed date.
It is also possible to apply for an order to prevent your husband or wife from disposing of assets that are solely in their name, to lower your financial claim, or to hide assets in a divorce. Remember, you can still apply to the courts to have an asset protected from disposal, even if it is not yours.
Some other options to prevent your husband or wife from settling assets may include asking the court to require your husband or wife to disclose their financial assets or give you a larger share of the assets. If the asset has been sold, you can ask the court to reverse the sale of the asset through an ‘Avoidance of Disposition Order’ or ‘Add back’ the value of any disposed assets to the marital pot, even if the money has been spent.
