It seems that property prices whilst slowly increasing do not seem to be reaching the values prior to the recession. From my experience it shows that couples are still struggling to maintain their properties and are continuing relationships or leaving the property in joint names even following a relationship breakdown due to negative equity i.e. the mortgage is more than their property is worth. This has led to problems as most people have refused to sell their home and move on with their lives as they do not want to be left with a shortfall that they would have to pay back to the lender following the sale of their home.
People in this situation should note that there are still options available to them. There are agreements that can be made on separation e.g. ‘Separation Agreements’. I have drafted a lot of these agreements and these can give couples added protection when a property is in negative equity. For example I have drafted many agreements where the mortgage and the property remain in joint names or the mortgage alone remains in joint names due to the fact that one person cannot obtain a mortgage in their sole name due to the negative equity situation. In these cases settlement can still be reached by way of an indemnity. This means that the person remaining in the property must try and obtain the mortgage lenders consent to the transfer of the property into their sole name (i.e., transfer of mortgage application). However, in the event they are not agreeable they will provide an indemnity. This means that the property will be in one person’s sole name and the mortgage will remain in joint names. However, whilst the other person is still liable for the mortgage in the event they are pursued for any money due under the mortgage then they can pursue this money direct from the person who remained in the property.
These agreements can be drafted to allow one person to start afresh without fear that they may be chased by their mortgage lender. Most agreements also confirm a time limit on when the indemnity expires and if the mortgage has not been transferred into the sole name of the remaining person by that time then the property by default has to be sold. The time limit specified is up to the people who have made the agreement and this can be for example 2 years or 5 years. This extra time should allow the property to come out of negative equity without the consequences of the person who no longer contributes to the property attempting to claim some money from the person who remained in the property and paid the mortgage and bills alone.
Should you require any advice with regards to separation with your partner, dealing with a former home or to draft a separation agreement please do not hesitate to contact our specialist family team on 01616 966 229.
By family law expert, Gillian Lavelle
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