An ever-changing housing market- how an unpredictable housing market may impact upon financial remedy orders

In recent times, the housing market has seen a significant uptake with many reporting that house prices have risen in the last year at their fastest rate for over a decade. With many attributing the current boom in the housing market to the stamp duty holiday period, the question is now being posed what will happen now the scheme is being phased out.

Not specific to the current Covid-19 pandemic, the housing market can often be very unpredictable and when financial remedy orders encompass the sale of a property, the impact of a growing, or indeed slowing, market can significantly impact on the practicalities of implementing an order.

The recent case of Derhalli v Derhalli [2021] EWCA Civ 112 serves as an important reminder that when a financial remedy order includes the sale of a property, particular care should be exercised to ensure the order provides sufficient protection to both parties should the housing market change.

In this case, the main asset of the marriage was the Former Matrimonial Home in London which was registered in the husband’s sole name. Following the parties’ separation, the wife had remained living in the property with the parties’ adult children. The wife had registered protective notices against the Former Matrimonial Home. The parties owned two further properties, one utilised to house wife’s parents and the other utilised as a country home for the family.

Subsequent to acrimonious financial remedy proceedings, the parties were able to agree a consent order. The consent order was particularly complex and ran to some 47 pages. The consent order provided for the Former Matrimonial Home to be sold with the husband making two lump sum payments to the wife upon sale. Payment of the lump sums were in full and final settlement of the wife’s financial remedy claims.

It was evident that both parties had anticipated the Former Matrimonial Home would sell quickly. The property was placed on the market for sale in June 2016, three months prior to the consent order being made, for an asking price of £7 million. During this period, the wife took sole responsibility for the outgoings associated with the property and the bills were accordingly transferred in to her name.

However, against the backdrop of Brexit uncertainty, the housing market stalled and the Former Matrimonial Home did not sell as quickly as had been anticipated by the parties. Whilst frustrating under any circumstance, in this particular case difficulties arose as the consent order entered in to by the parties made no provision for a prolonged sales process. The consent order was entirely silent on whether the wife could live in the Former Matrimonial Home, whether the husband could evict the wife or whether she should pay rent for her occupation during this time.

The husband could of course have sought possession of the Former Matrimonial Home by virtue of powers under section 24A MCA 1973 which permits a court at any time after the making of an order for sale of a property to make such “consequential or supplementary provisions as the court thinks fit”.

Notwithstanding the above, in 2017, the husband brought possession proceedings against the wife in the County Court. The husband largely relied on his suggested interpretation of the consent order of 2016 and the fact he remained sole beneficial owner of the Former Matrimonial Home.

In the first instance, the Judge held that the wife occupied the Former Matrimonial Home as “a gratuitous licensee terminable on reasonable notice where-after she would be a trespasser liable to pay damages for use and occupation thereof until delivering vacant possession.”

Permission to appeal the County Court order was granted in June 2019. In allowing the appeal in November 2019, substantial reasons were given for concluding that the first instance Judge had erred in his interpretation of the consent order.

In February 2020, permission to appeal was granted against the Judge’s decision to reverse the declaration made by the first instance judge. The Court concluded there was a matter of practice or principle for this court to consider or some other compelling reason for the appeal to be heard.

On appeal, it was argued on behalf of the wife that the reasonable reader of the consent order would have known the Former Matrimonial Home was purchased a number of years beforehand, occupied by the family as their main residence and the husband had vacated the property following the parties’ separation leaving the wife in occupation. It was emphasised that at the time of the consent order being made, the wife had exclusively occupied the Former Matrimonial Home for approximately two years and the parties had gone to some lengths to transfer all associated bills in to her sole name. It was argued that such a position was at odds with the suggestion the wife could be required to the leave the property at the behest of the husband.

On appeal, King LJ concluded:

“In my judgment, the judge in an unimpeachable judgment applied the law correctly and was entitled to conclude that the effect of the parties’ agreement was that the wife was entitled to stay in occupation of the matrimonial home until such time as the house was sold. I would therefore, if my Lady and My Lord agree, dismiss this appeal. I would only add this as a footnote: It may be that, following this case, in order to avoid a similar dispute arising and perhaps it might be thought in an excess of caution, parties will choose to be more specific as to the precise terms under which a party remains in occupation of a matrimonial home pending sale.”

In this particular case, the Former Matrimonial Home in fact sold in March 2019 for the sum of £5.9 million, far less than had initially been anticipated. The judgement of King LJ makes clear that in order to avoid scenarios in which protracted litigation is needed, when drafting final financial remedy orders, all parties should carefully consider the consequences of failing to make provision for occupation of properties. Whilst events such as Brexit, and now the unprecedented Covid-19 pandemic will always have substantial impacts on the housing market, the general uncertainty involved in selling properties leaves all parties vulnerable should orders not be clear and conclusive.