The temptation of a DIY divorce
With the cost of living crisis starting to bite, it is understandable that many people will look for financial shortcuts in all aspects of life, including legal fees. Divorce lawyers, particularly, are often seen as an unnecessary expense for those who consider that they know what they are doing and can DIY their divorce. The cynics among you may raise a wry eyebrow at a lawyer extolling their own virtues, but family lawyers all too commonly see the nicest of people getting into the biggest of pickles – not all of which offer easy or cheap extraction.
It is not unusual to be instructed to help a client deal with what they think is straightforward, but which, on occasion, can be near impossible to correct cheaply or quickly because the lawyer has been instructed too late. What follows is a composite common scenario. A husband and wife reach an agreement direct that enables them (they hope) to postpone divorce for now and focus on dealing with finances. They go to the effort of drafting up documentation using the internet as a resource and are some way into trying to implement the agreement. The documentation gets a solid B+ for effort, but still has some obvious (to a lawyer) gaps that need closing in the event of subsequent divorce.
The desire to remain amicable has led the couple to believe that they have autonomy over their financial affairs without either appreciating the need for third party approval.
In this four part series, we will cover the dangers of DIY divorce and the most common aspects people forget, such as;
Part 1: Mortgages
Part 2: Pensions
Part 3: Remarriage
Part 4: Tax
The mortgage on your marital home
It still surprises me how many people don’t appreciate that they don’t own a mortgaged home, and therefore cannot do with it as they please. As our couple find, agreeing what should happen to the house and getting the lender to agree can be two very different things indeed. Third parties, particularly financial institutions, will likely have the final say over a couple’s financial arrangements if assets are being moved around. In cases where a couple appear to have reached agreement direct, a lender can insist on legal advice to avoid any possible challenges later to the new lending arrangement. In the ‘simple’ agreement reached between the couple, the problems start to pile up:
- The existing lender will not agree the mortgage being moved into one party’s name;
- Another lender is found but wants a lawyer’s undertaking;
- The lawyer’s undertaking has to say that the couple have been legally advised before entering into their agreement (they haven’t);
- The lawyer’s undertaking has to say financial disclosure has been entered into (it hasn’t);
- The lawyer’s undertaking has to say the agreement is fair (it isn’t entirely);
- Each are required (despite not wanting to) to have independent legal advice;
- Both are oblivious to capital gains tax issues that arise due to a long separation period.
The list goes on. Unsurprisingly, the couple become increasingly agitated by various professional strangers appearing and interfering with their carefully negotiated agreement. They cannot understand how something so simple has become so complicated. It is impossible for any lawyer to provide the undertaking sought because the deal has already been done and the couple have agreed that, so far as they are concerned, they do not need to exchange financial disclosure. This makes perfect sense to them, but does not satisfy third party criteria, which criteria is, in the end, unavoidable. The family lawyer’s role, once instructed, turns into negotiating with the lender to try and agree a different undertaking that reflects the circumstances and still satisfies lending criteria. This can take time, and all the while the deadline on the loan offer is looming ever closer.
Frustration adds to irritation and leads to a small rift between them, which also has the effect of taking the couple back to the drawing board of negotiation. What limited funds they have are expended trying to resolve a problem that is moving backwards rather than forwards, and the implementation of their agreement is, for now, put on the back burner.
Get advice early
If the couple had made a modest investment in legal advice early on, they would have been pointed in the right direction, directed to make proper enquiries, and their available funds for legal fees managed practicably and sympathetically. Instead, they had not appreciated that using lawyers is not to fall down a rabbit hole of expense; a lawyer’s role is to point out how to avoid the rabbit holes in the first place. A meeting with a family lawyer does not come with an obligation to provide further instructions. It has to be worth a small investment, therefore, to take outline advice early on, get an idea of possible obstacles ahead, and continue informed discussions direct.
