There are many ways the family home can be dealt with as part of divorce proceedings. One such outcome is a Mesher Order, or an order for deferred sale.
A Mesher Order is a court order delaying the sale of the matrimonial home when a couple are divorcing. Under a Mesher Order, the property is effectively held in trust in the couple’s joint names until a particular event or condition triggers the sale.
The name Mesher Order is taken from the case ‘Mesher vs Mesher and Hall’ where this type of order was first used by the courts.
When are Mesher Orders used?
Mesher Orders are put in place when one of the parties requires a residence but does not have the financial means to purchase another home using the equity of their property if it were to be sold at the time of divorce proceedings.
In practice, Mesher Orders are often used to allow one parent to continue to stay in the marital home to provide stability for their dependant children, with the non-occupying parent still retaining financial interest even if they are no longer living in the property. The home is still jointly owned by both parties, regardless of which party is residing in the property.
High property prices, the requirement for significant deposits and high rental prices are resulting in increasing use of Mesher Orders, particularly where families are trying to maintain stability for children and both parties can retain their respective financial interests in the property.
What counts as a trigger event?
The courts have wide-ranging flexibility in issuing Mesher Orders, including when determining the nature of the events which would trigger the deferred sale. For example the child(ren) reaching a particular age e.g. if they reach 18 years or until they complete full-time education, if the parent residing in the property remarries or if the parent residing in the property co-habits with someone.
What happens when the property is sold?
In the event of a trigger event occurring, once the property has been sold, the proceeds of the equity in the property will be divided between the former couple.
The terms on which the funds are divided will be as outlined in the original court order. For example, it could be based upon a percentage of the equity for each parent, a fixed sum or the occupying parent may even pay a deferred lump sum at a particular point/trigger so they can reside in the property and take over legal ownership.
What are the wider implications of a Mesher Order?
A number of considerations should be taken into account by both parties.
- Will the property increase in value so when it’s sold the occupying parent will have sufficient funds to purchase another property?
- Will the non-occupying parent be subject to Capital Gains Tax when the property is sold and money released, if another property has been purchased and how can this be overcome?
- Does the agreed sum for division of the sale in x years take into account inflation and hopefully the rise in property prices?
- Who pays for any ongoing repairs and maintenance to the home?
- Can both parents be amicable for the set period of time until the property is sold or will there be ongoing conflict and continuous stress without a clean break?
- If one parent remarries or cohabits, has the order taken this into consideration?
- Ability for the non-occupying parent to obtain another mortgage if name still exists on the on current matrimonial home?
- Any effect on credit score of non-occupying parent if parent in property regnates on mortgage payments?
There are likely to be wider, related considerations of a Mesher Order, requiring specialist advice to help ensure the non-occupier is not subject to related tax liabilities such as Capital Gains Tax and ensurin the parent residing in the property can claim main residence tax relief.
What is a Martin Order?
A Martin Order is similar to a Mesher Order with the difference being that the spouse will continue to stay in the matrimonial home until they die or remarry, and there are no children involved.
The main reason for this agreement is due to the financial circumstances of one of the parties who may not be able to purchase another property even with the division of the equity from the former matrimonial home.
Why take legal advice on a Mesher Order?
There are pros and cons to a Mesher Order which both parties will need to consider. Some are critical of Mesher Orders as being a short-term fix, and for continuing financial ties between a divorcing couple that will inevitably require further dealings when a trigger event takes place. But for others, the Mesher Order offers a solution which provides much-wanted stability and continuity fore children.
Take professional advice on your particular situation and the implications of a Mesher Order for your circumstances on both the short and long term.