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Slump food for thought for parting couples

By Jason Wren, Associate

First published in The Press, 27 August 2008

There’s been plenty of comment lately about the difficult position that separated couples face because of the current property market’s downturn and the waiting game they must play until the economy improves. The price of their  main asset, the family home, may well have taken a pounding and the remaining equity on sale could be far less than expected. 

It is generally accepted that each spouse/partner will be entitled to half the assets acquired during the relationship.  If their home has enjoyed a steady and significant increase in value, then through sheer market forces the relationship “property pie” has grown. 

However, against the current economic backdrop, half the pie may not be enough. So how can you improve your position, given that your capital base has diminished in these recessionary times?

For a number of years now, there has been provision in our updated domestic property laws (section 15 of the Property (Relationships) Act 1976) to introduce the concept of “economic disparity”.  Basically, this refers to people who feel they have been  financially disadvantaged during the relationship compared to their erstwhile partner. One partner’s ability to financially rebuild is often far greater than the other.

The perennial example is that of a couple who separates and the “stay at home” mother suddenly realises that after several years out of the workforce, raising children and keeping the home fires burning, it is hard to re-establish her career.  All this has been put on hold so she can be a fulltime mother while her partner’s career is going ahead in leaps and bounds.

You can seek to use the section 15 remedy if you feel you have been economically disadvantaged within the relationship.  But there must be proof of an economic disparity because of decisions made during the relationship in terms of what function or role each person assumed. You’ll also need to show that your former spouse/partner’s income and living standards will be significantly higher at the end of the relationship. 

It might sound straightforward but in reality, to prove such a claim requires a full and comparative analysis of each spouse’s income and living standards.  And, if a disparity does exist, is it significant? Was it caused, in effect, by the division of functions between the couple? What sort of compensation would be fair? How much is enough?

This remedy is not, as some believe, an ability to latch on to that other spouse’s future earnings but is more an immediate means of looking at the size of the current pie. If we are not going to cut it down the middle, then how much more do we serve up to the economically disadvantaged party?

You must be able to show that the disparity was linked to choices made about roles in a relationship and not choices that were necessarily made about careers.  For example, if one person’s career choice is more lucrative, there may not necessarily be a link back to division of functions.

But a clear foundation for a claim would exist if you placed a career on hold while raising children and it could later be proven that this has had a strong impact on your finances. Even so, you would still have to prove what capital sum would be required from the pie to effectively compensate for that time out and how much money would put you in - not necessarily an equal but better position moving forward independently from the relationship after it has ended.

While decisions coming through the Courts are endeavouring to follow a degree of consistency, there is still significant uncertainty about when this remedy should be used and to what extent it will be successful.