With property prices decreasing, delayed lump sum payments in divorce settlements must be dealt with particularly carefully.

The problem occurs when the net value of a property is decided during ancillary relief proceedings but subsequently changes as a result of fluctuations in the economy. When a couple divorce, it is commonly agreed that one party will remain in the matrimonial home and the other will receive half the value of the property over a given period of time, with the outstanding monies due being subject to interest. If the house subsequently changes in value during the payment period, there can be unfairness for one party or the other.

In general, this is the risk one takes when a sum is agreed by way of settlement. However, this risk can be controlled. If the payment of a lump sum is as a share of more widely ranging assets, then it should be subject to interest. If the payment is to compensate for a share of a property, then it should be linked in some way to property prices. This may seem complicated, but it promotes fairness for both parties. It is desirable to use an index of property prices in your area and to set the amount to be paid based on prices at the date of the agreement. The base amount is then fixed by the order and can be varied to take account of any fluctuations in the property&amprsquos value.

If this precaution is taken, once an order has been made, the effects of inflation or deflation will not normally be a justification for an application to alter it. This, in any event, is difficult to persuade the court to do. In one case, in which a wife was to receive a lump sum for her share in the house, the payment was not made for a long time because her husband intentionally delayed the sale of the property during a period of rising house prices. In this instance, the wife succeeded in obtaining a revised settlement. However, the reason for this was the deliberate obstruction by the husband of the sale of the property, not the effect that the increase in house prices had on the wife.

Having expert legal representation will enable you to achieve the best result from your ancillary relief proceedings.

Contact Pauline O’Rourke or Stuart Daniel for advice on any Family Law matter.