COVID-19 EXPERT LEGAL INSIGHTS

Loosening lockdown: practical points for separating couples

22 May 2020

Now we have a loose ‘sketch’ of how the country might emerge from lockdown, what should divorcing couples be considering?
 

The new normal of the Family courts

The Family Courts have adapted quickly to the challenges presented by lockdown. Divorce petitions are still being processed and hearings are taking place remotely wherever appropriate. Parties are also being encouraged to make more use of private hearings and alternative dispute methods such as mediation and arbitration. All of these measures mean that couples who want to divorce, or continue with existing proceedings, can do so. But should they?

Practicalities and preparatory steps

It is best practice to discuss, and ideally agree, a divorce petition before it is filed. This helps avoid the unnecessary cost and stress of a divorce being defended by the recipient spouse.  If couples do not feel able to do this with their soon-to-be-ex they can at least prepare their petition so they are in a position to move ahead when the time is right.

Anyone filing on the basis of the other party’s unreasonable behaviour will want to consider the details of that behaviour particularly carefully now. It is not difficult to imagine a recipient spouse, and perhaps even a judge, taking issue with a petition which is based solely on behaviour during the lockdown period, a time when few of us have been at our best, especially if it is filed shortly after any significant lift on restrictions.

Divorcing spouses can prepare by collecting financial information whilst lockdown continues: bank statements can be sought, property documents collated and outgoings analysed. They may, however, face difficulties when it comes to valuing key assets such as businesses, property and pensions.

Valuations and opportunities

  • Businesses - those who own businesses, or have spouses that do, may feel unable to value their business with any certainty at present. Parties might want to pause to give the economy time to settle but creative approaches can be found for those who want to continue. They could, for example, ask an expert to value the business as it stands and also based on historic data to give an idea of how the business could perform post-COVID-19. Another option could be for any settlement to be constructed so that it can be more easily varied if things do not pan out as the parties hope.
  • Property - In the same way that the economic fallout of coronavirus is hitting some industries harder than others, different types of properties could be impacted in different ways. It may, for example, be easier to sell  properties with more outdoor space, in less densely populated areas, than would have been possible pre-COVID-19. Conversely, city-centre apartments, particularly those catering to international citizens travelling to and from the UK for work, may suffer. Rents on commercial units could undergo significant change as businesses consider how to use their premises and, in some cases, whether they even need them. Those for whom property would form a major part of any settlement should take legal and expert property advice as early as possible.
  • Pensions - different pension types will produce different issues, and in some cases opportunities, which could impact on a divorce settlement. For example, a client with a defined benefit pension is likely to get a higher transfer value now – because of gilt yields and provision costs - than they would have in late 2019 although this may not last. Transferring the pension out could be an option. A client with a defined contribution or personal pension could have suffered a loss and may need to take mitigating action. They might, though, also be able to investigate whether reduced values could help their tax position (for example if they previously had Lifetime Allowance issues). Taking financial and tax advice at an early stage is likely to be of primary importance.

Set aside and variation

Some people will have a divorce settlement which is now impossible or unfair to implement. In exceptional circumstances parties can set aside an order and, more commonly, orders can be varied if the situation demands it. Those who think they are in this position should take specialist family law advice and consider all options available to them for finding a solution, from mediation and private hearings to court proceedings and arbitration.

The road ahead

The road ahead is far from clear and some people will have good reasons for pressing pause on their divorce. For those who want to move forward, though, creative solutions can be found.

This blog was first published in eprivateclient in May 2020 - How is COVID-19 affecting divorcing couples? (subscription required).

Further information

You may be interested in reading our other blogs in this series about changes in financial circumstances as a result of the coronavirus crisis and its impact on divorce settlements and maintenance:

If you concerned about the impacts of COVID-19 on your divorce settlement and you would like advice on how to best proceed, please contact a member of our team.

Please note that the general guidance provided within this blog is accurate at the time of writing (22 May 2020). It does not constitute legal advice and specialist advice should be sought in individual circumstances.

 

About the author

Cady Pearce is a Senior Associate in the family and divorce team. She advises on a range of private family matters involving both finances and children. Cady has experience of complex financial cases and often deals with cases involving overseas assets and unusual issues. She previously worked in the financial litigation team at Magic Circle law firm and is familiar with complicated financial structures. She has a particular experience in advising City professionals and businesspeople.

 

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