Postnuptial agreements and family business succession plan

The 2020s have been called ‘The Great Wealth Transfer,’ as £1 trillion of wealth built up by the ‘baby boomers’ is expected to pass to the next generation. Much of this wealth will pass via a family business, and parents who wish to retire are having to make strategic decisions about succession planning.

A particular concern for many is the potential impact on a family business of a divorce or the dissolution of a civil partnership, and the consequent negotiations of a financial settlement.

‘Business difficulties can arise for any number of reasons, and directors usually have business strategies, budgets and contingency plans,’ says Kirsty Tighe Head of the family team.  ‘However, few businesses have a plan for what would happen if an owner got divorced.  This could have devastating consequences for a family business, yet it is rarely talked about until it is too late.’

According to the Office of National statistics, 41 per cent of marriages will have ended in divorce prior to their twenty-fifth anniversary.  With such a high level of risk, it is not surprising that business owners are asking what can be done to protect their business in such an event – especially if they perceive a child to be in an unhappy marriage.

If the founder’s offspring is already married or in a civil partnership, then one thing to consider would be to propose a postnuptial agreement before they transfer business assets.

What is a postnuptial agreement?

A postnuptial agreement is a legal contract between spouses, outlining how assets will be divided in the event of divorce, which is signed after the marriage or civil partnership has taken place.

Like a prenuptial agreement, a postnuptial agreement is not legally binding but it will tend to be upheld by the court provided it has been entered into fairly.

How will a postnuptial agreement benefit the family business?

When negotiating the financial settlement in a divorce, business assets will normally be valued as part of the matrimonial assets for sharing.  A postnuptial agreement is unlikely to be able to ring fence the business entirely, but it can be realistic about how much of the asset a spouse or civil partner could expect and over what time period payments would be made.  For example, it could stipulate that a spouse would receive a certain percentage of turnover or profit, and allow for this to be paid over a number of years to minimise disruption to trade.

If the couple worked in the business together, then a divorce could also mean negotiating the end of one spouse’s or civil partner’s employment as well.  A postnuptial agreement can include the basis for how any severance would be calculated, and stipulate any restrictive covenants such as not setting up business or working for a competitor within a certain trading distance of the existing business.  You may have further stipulations you wish to include that are specific to your business, such as protecting your trade secrets and customer and supplier lists or ensuring your employees are not poached.

A postnuptial agreement can ensure that the business stays in the family, and protects the future of the business by outlining how both current and future assets of the business will be treated.

Reassurance can be provided between family members if all owners are prepared to enter a postnuptial agreement.  This means each of your livelihoods can be protected.  It can encourage both investment into the business and growth as it helps to provide stability and certainty.

What can a postnuptial agreement cover?

While the postnuptial agreement may have been prompted by the proposed transfer of business assets, the agreement can cover how all your assets would be divided, not just the business assets.

For example, you can agree what happens to land, properties owned, stocks and shares, saving and investments, as well as pensions.

One of the advantages of a postnuptial agreement is that while it offers you more certainty, it can also save you significant costs if a divorce does occur.

The importance of independent legal advice

It is critically important for each person to have independent legal advice.  For any agreement to be enforceable, the court needs to be satisfied that it was entered fairly, with each person having a full appreciation of the assets involved and what their entitlements could be in a divorce.  If upon receiving advice your spouse or civil partner does not wish to enter the agreement, then they have the right to refuse.  If the court feels that someone has been unduly influenced to sign, then it is unlikely to uphold the agreement.

If your spouse or civil partner does not have the resources to pay for legal advice, then you can offer to pay or the business can pay, but the legal advisor acting must be clear that their client is your spouse or civil partner, and not you.  Their duty lies with their client.

How we can help

If you are the parent who wishes to propose a postnuptial agreement to protect the future of your business, we can help you by providing you with the basis and information needed for your child to consider, including the protection it provides when growing your business.

If your parents or your in-laws have proposed a postnuptial agreement as part of their business transfer, then we can help you to understand the proposal and what would be fair to you in the circumstances.  We will advise you on what your likely entitlements would be in a divorce scenario.

Contact Kirsty in the family law team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

‘Your pets are an important part of your family, but providing for them in your will is not as straightforward as providing for other family members,’ says Nigel Miller, Head of the wills and probate team. ‘Whilst a cat or dog might be relatively easy to care for, pets such as tortoises, llamas, or horses will likely require specialist care by someone who has sufficient time, knowledge and property to give your pet the care they need.’

Pets do not have a distinct legal personality and are technically belongings, but they sit in their own category between possessions and dependants and need to be considered carefully.

This means that you need to leave instructions about them in your will, and any financial provision you want to make for them cannot be a gift to the pet.

Livestock or pet?

There is a distinction between pets and livestock for the purpose of a will. You might, for example, have two pigs or llamas that you keep as pets, which would be treated as any other pet would in your will. However, if you have, for example, a rolling stock of 20 pigs that are used for breeding, or sold for their meat, this would likely be considered livestock and a business asset. Leaving livestock as a business asset under your will should be dealt with very differently and you should seek specific advice on this point to consider any pre-existing business agreements, as well as the most tax effective options for disposal on your death.

Leaving instructions about a pet in your will

First, you will need to consider what you wish to happen to your pet.

The most straightforward way is to leave your pet directly in the care of another person. This could be an existing owner of the pet, such as your partner or children, or it could be another family member or friend who does not currently share ownership of your pet. As with any gift in your will, you can leave your pets to whomever you wish and they do not need to know, or pre-approve, your intentions. However, a beneficiary of your will is not obliged to accept their gift and it can, therefore, be worth checking in advance that they are happy to take on responsibility for your pet.

Alternatively, you may prefer to leave your pet to a person or organisation for them to find the pet a suitable new home. This could be an animal charity, a family member, a trusted friend, or an executor, for example. You can state your wishes in regard to rehoming, but you should bear in mind that these would not be legally binding and the person or organisation would be ultimately responsible for deciding where your pet should end up going.

At the time of your death, it is possible that an individual may not be best placed to take on the responsibility of rehoming your pet, (for example, if ill or in unsuitable housing), and you should also consider the possibility that they may decide to pass the responsibility on by involving an animal charity.

In the case of a larger animal, for example, a horse, it may be that they can be sold by the estate and the sale proceeds paid to your beneficiaries. Your executors will have the authority to sell the pet, and it can be useful to leave a separate letter of wishes to guide your executors as to how, where, when, and to whom you would like the pet to be sold.

A professional can help you to decide the best approach for your circumstances.

Practical factors to consider

If your pet requires unusual care, or extensive facilities or land, this may need extra consideration when it comes to deciding who the best person is to care for your pet.

If you are leaving your pet to a charity to be rehomed, you should consider any specific wishes you might have about the type of home you would like them to go to and any particular way in which you would like them to be cared for. If you have more than one pet, you might also wish to request that they are not separated. As well as a will, a solicitor can draft a detailed letter of wishes for you so that your executor, and the person or charity to whom the pet is left, is aware of your wishes.

Financial considerations

If you opt to leave your pet to an existing owner, it is less likely that they would require a pot of money for your pet’s upkeep. However, another individual might need some financial assistance in this regard.

Whilst an animal charity is unlikely to need funds specifically for your individual pet, as they will already have their own general funding, a monetary gift to them in recognition of the fact that you are leaving your pet in their care might be appropriate.

Whilst you cannot leave money to a pet, you can leave money to the person who will become responsible for looking after your pet. Any such gift should be by way of a bare trust, to allow the person or charity to use the funds for your pet’s benefit, including food, vet bills, and other such essential costs.

You should think about an appropriate level of funds, as well as how flexible you want to be with the terms under which it can be spent, including any additional wishes you would like known.

Any money left in a bare trust for your pet’s upkeep will need to include a provision about what would happen to any remaining funds if your pet is no longer in need of the trust money. You might want this to revert to your family or friends, or you might want it to be passed to a charity of your choosing.

How we can help

Pets must be considered carefully within a will, and a well-drafted will, prepared by an expert, will ensure that all eventualities are covered.

For further information, please contact Nigel in the wills and probate team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

What is a Cohabitation Agreement and what are the benefits of having one?

More and more families in England and Wales are comprised of cohabiting couples, with a proportion of those families believing they have the same rights similar to a married couple, especially if they have cohabited for a long time. However, the “common law marriage” is a myth and cohabiting couples have little protection under the law in England and Wales.

How can cohabiting couples protect themselves?

As cohabitees, there is no legal right to share your former partner’s income or assets if the relationship breaks down. Furthermore, there is no entitlement to your former partner’s pension. If there is a conflict as to what should happen to your home, the law is very complex and proceedings are often expensive.

A cohabitation agreement, is a written document which is tailored to the financial position of both you and your partner. The agreement allows you to detail the property and assets each of you own. It can also be clearly set out how those assets are to be divided in the event the relationship breaks down. For example the agreement can detail how the home should be divided in the event where one party has contributed more to the deposit.

However a cohabitation agreement can not make provision for pension sharing on separation, as this only applies to divorce only.

A cohabitation agreement can also detail who is responsible the day to day finances during the relationship.

How to make a Cohabitation Agreement

A cohabitation agreement can be entered into at any time, whether that be at the start of you cohabiting, or whether you have lived together for many years.

We have extensive experience in drafting cohabitation agreements and we can advise accordingly based on your circumstances and needs. We offer an efficient service and can help on how to protect yourself further for example making a Will.

Our specialist team are available on 0191 297 0011. Alternatively feel free to email us on wb@kiddspoorlaw.co.uk or raise an enquiry through our website www.kiddspoorlaw.co.uk

The Government’s 2024 Spring Budget saw significant changes to the way property is taxed, including the imminent abolition of multiple dwelling relief. This will primarily affect investors looking to buy multiple properties at the same time, however, it could also affect you if you are buying a property that comprises more than one unit, such as a house with a distinct annex.

‘If you are purchasing a property with a separate granny annex and multiple dwelling relief applies to your purchase, it can save you thousands of pounds in stamp duty,’ explains Philip Walker Head of the conveyancing team.  ‘However, this relief will very shortly be abolished, so if you think an intended purchase may qualify, then speak to your solicitor as soon as possible.’

In this article, Philip answers some of your questions about multiple dwelling relief and the recent changes.

What is multiple dwelling relief?

The amount of stamp duty you pay will usually depend on the purchase price of the property. If you are buying more than one property in a single transaction, or what HMRC considers to be linked transactions, then stamp duty will usually be calculated on their combined value. So, for example, if you are buying two flats in a block costing £350,000 and £300,000 respectively, and assuming you already own property, you will have to pay £39,500 in stamp duty. This is based on the total combined purchase price of £650,000. The first £250,000 is taxed at three per cent (£7,500), the remaining £400,000 at eight per cent (£32,000).

In contrast, where multiple dwelling relief is available, you will only pay £27,000 in stamp duty, a saving of £12,500. This is because this relief allows you to average the cost of the properties. In this way, each ‘nominal’ property valued at £325,000 (£650,000 divided by two, the number of properties) can benefit from the lower rate bands of stamp duty. So, in this example, you will pay stamp duty at three per cent on the first £250,000 of the averaged property price multiplied by the number of properties (£7,500 x 2 = £15,000), and at eight per cent on the remaining £75,000 (£6,000 x 2 = £12,000).

Who benefits from multiple dwelling relief?

Multiple dwelling relief can apply wherever you buy two or more dwellings in the same transaction. For example, an investor buying several new-build apartments to add to their portfolio can claim the relief, as they can if buying ‘off plan’ (although special rules then apply).

The key requirement is that all the properties should be suitable for use as separate dwellings. This means a house with a separate annex could qualify if both are sufficiently independent of each other and individually suitable for a person to occupy as their home. However, this can be a very grey area with HMRC sometimes challenging claims for multiple dwelling relief in the courts. So, it is imperative to get expert advice before making a claim.

How has the 2024 budget changed things?

In his recent budget, the Chancellor of the Exchequer abolished multiple dwelling relief.

Transitional provisions mean you may still be able to claim the relief in two situations:

• The first is where you exchanged contracts on or before 6 March 2024 (provided the terms of that contract have not been varied and it meets other conditions). In this case, you can claim multiple dwelling relief regardless of the date of completion.
• The second is where you have exchanged, and ‘substantially performed’ a contract before 1 June 2024. Although ‘substantially performed’ has a special meaning for tax purposes, this will usually mean completion of your purchase.

Can I still claim multiple dwelling relief?

If you exchanged contracts on or before 6 March 2024, you could still claim multiple dwelling relief. In some cases, you may even claim reimbursement from HMRC if you were entitled to the relief but did not claim it when you completed. There is a twelve-month deadline for such applications. So, if you think this could apply to you, speak to your solicitor without delay.

In all other cases, you will only be able to claim multiple dwelling relief if you complete your purchase before 1 June 2024. If you are in the process of buying multiple dwellings, or plan to do so imminently, then completing before that date could save you money. The timetable is tight, so this is something you should discuss with your solicitor at the earliest opportunity.

While it makes sense to benefit from multiple dwelling relief if possible, you should avoid rushing into a commitment just to beat the deadline. It is more important to ensure the transaction as a whole works for you, and that there are no other legal issues which could cause you problems in the future.

How we can help you

Our team of residential property lawyers have experience in all aspects of conveyancing, including property tax. Being proactive, where multiple dwelling relief applies, we will progress your purchase to give you the best chance of making a successful claim. However, we will never lose sight of the bigger picture.

We can also advise you if there are other ways of reducing the amount of stamp duty payable. For example, other reliefs may apply if you are buying six or more properties in a single transaction, or your purchase includes a mixture of residential and commercial use.

For further information, please contact Philip in the conveyancing team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

If you are helping a loved one who is ill or vulnerable in their later life, whether formally or informally, there are various bodies that you might encounter with whom you will need to liaise to assist you with your loved one’s affairs.

Nigel Miller, Head of Wills and Probate highlights the main organisations and outlines why you may need to deal with them.

Whilst some organisations might be happy to liaise with you on an informal basis, many will not. Even those bodies which are willing to discuss your loved one’s affairs will require proper authority before allowing you to make any decisions for them.

In addition to your loved one’s solicitor, the main organisations that you might need to contact during this stage include, the Office of the Public Guardian and the Official Solicitor. You may also have to deal with the NHS, and your local authority.

Making sure you have the right authority

If you know that your loved one has planned ahead by making a power of attorney, you will need to locate the original. This might be stored with their papers at home, but it is more likely that their solicitor will be holding it for safekeeping. If so, they will need identification from you to release the original. Some solicitors will also require either your loved one’s authority or, if they no longer have mental capacity, some form of medical proof of such lack of capacity.

Office of the Public Guardian

The Office of the Public Guardian is responsible for registering powers of attorney and maintaining records of all the registered powers of attorney in England and Wales.

If you are uncertain about whether your loved one has made a power of attorney, it is possible to request a search of the Office of the Public Guardian’s records. This requires a specific form, which our solicitors can assist you to complete.

If you already know that a power of attorney exists, then you might need to liaise with the Office of the Public Guardian to register it. Again, this is a process with which our solicitors can assist. The process is dependent on the type of power of attorney:

• if your loved one made an enduring power of attorney, then it will be up to you to register this; or
• if they made a lasting power of attorney then this may already be registered.

You should check the position with a solicitor to ensure you are fully aware of what is required of you.

The Official Solicitor

The Official Solicitor’s Office is a governmental body which acts on behalf of those who are vulnerable and unable to instruct a solicitor of their own volition.

If the Official Solicitor is appointed, they will be appointed on behalf of your loved one, rather than you, but you will need to liaise and negotiate with them, and our solicitors can assist you with this. The Official Solicitor’s Office is an independent government body.  If the appointment of the Official Solicitor is deemed necessary, the cost of this service will be met from your loved one’s funds.

Acting for your loved one once authority is established

If you are appointed as your loved one’s attorney or deputy, you would then need to deal with various organisations to ensure their affairs continue to run smoothly and that their needs are taken care of. This would include financial institutions, such as their existing banks and any investment companies, as well as potentially the Land Registry and conveyancing solicitor if they have a property that needs to be sold, and a financial advisor who specialises in later life clients to ensure that your loved one’s funds are securely and appropriately invested in a risk-averse way that will yield the best possible returns.

Whilst your loved one’s financial position is important to ensure that they have access to suitable care, if a loved one is ill or vulnerable you may also be concerned about the health organisations you need to contact.

Local authority – social services

Depending upon their financial circumstances, your loved one’s local authority may be involved in ensuring that they are placed in a suitable care home or that suitable at-home care is provided. The local authority will also be key in establishing whether funding for your loved one’s care is available.

Provided you have the relevant authority, you are entitled to attend any meetings with the local authority when financial support is discussed. Before attending any care funding meetings, you should seek advice from a solicitor so that you are fully aware of your loved one’s rights and options. If required, you are also entitled to request that your solicitor attends the meeting with you.

National Health Service (NHS)

Similarly, the NHS may be involved in discussions and decisions surrounding care funding. NHS care funding is available in limited circumstances, but you should obtain legal advice and explore whether this applies to your loved one. You may also be required to attend meetings with NHS doctors, or other medical staff, to discuss aspects of your loved one’s care and how this should be managed.

If you are making decisions on their behalf, it is important that you ensure you are involved in the process all the way along so that you can make decisions on a fully informed basis and one that is in the best interests of your loved one.

How we can help

Acting for a loved one when they are ill or vulnerable can be very rewarding, but it can also be an onerous responsibility. Our solicitors can help you to ensure that your duties as an attorney or deputy are adhered to properly and fully, and that your loved one is cared for in the best possible manner.

For further information, please contact Nigel in the wills and probate team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

The Government’s 2022 English Housing Survey reported that 27 per cent of first-time buyers used gifts from family or friends to fund their house deposit.  With the average deposit now required exceeding £43,000, it is hardly surprising that so many seek the help from their family to get their foot onto the property ladder.  Well-intended parents will often gift large sums of money to their adult children without taking any legal advice or having any formal documentation drafted. But what happens if the couple decide to separate?

‘As a family lawyer, we regularly see sizeable gifts being made by family members to help a newly married couple starting out.  While this is often money to buy their first home, it can also be money gifted to help out with a business venture, or to extend or move house,’ says Kirsty Tighe, Head of Family Law.  ‘Difficulties can arise if that marriage or civil partnership later breaks down.  The spouse or civil partner whose family have been so generous may expect to see a larger share when it comes to dividing the matrimonial assets.  Unfortunately, that will not always be the case.’

What does the law say about gifts?

A gift can be any item, such as jewellery, vehicles or money provided to another person.

Personal gifts such as jewellery tend to stay within the ownership of the spouse or civil partner they were gifted to.  Joint wedding gifts, such as a valuable artwork or an antique, are treated as matrimonial assets regardless of whose family or friends gifted them.

Gifts can be redistributed by a court if that is deemed necessary for the fair division of assets.  For less valuable gifts, it is best to try and agree how these will be divided by proposing a list of the gifts you wish to retain.  For more valuable gifts, a formal valuation is likely to be required in order that the assets can be fairly accounted for in the division of assets.

Typically, it is monetary gifts that are most likely to cause conflict in attempting to agree the financial settlement after a divorce or dissolution of a civil partnership.

Issues with financial gifts

When money is paid by a parent or other family member without the expectation for repayment, and without an expectation of ownership or rights over how the money is used, it is deemed to be a gift.

In most divorces, gifts are treated along with the rest of the matrimonial assets which are subject to being divided.  That is because most divorces are dealt with on a ‘needs’ basis i.e. any financial settlement will cater for the financial needs of each partner or spouse.

Some divorces, typically those where assets exceed several million pounds, can be dealt with on a ‘sharing’ basis.  That is because there is significant excess wealth above that which is required to meet the financial needs of the separating couple.  In a sharing case, the court will consider significant gifts from one partner or a spouse’s family.  This may result in that spouse or partner obtaining a larger share of assets to reflect their family’s contribution.

Is it a gift, or a loan?

It is not uncommon to find, after a separation, that the family who generously provided money claim this was in fact a loan not a gift.  This is because loans and gifts are treated differently by the law.  If a loan is made, then the loan needs to be repaid or taken into account prior to the division of assets in a financial separation.

In determining if the money provided was a gift or a loan, the court will examine all the surrounding circumstances and the detail of the terms of the alleged loan.  This is when documentation can be helpful.

Is there any documentation available?

Being able to provide a written loan agreement, specifying the terms of the loan and repayment and which has been signed by both spouses or partners and witnessed would be ideal.  Unfortunately, in our experience this is not how most families work, and typically a much less formal arrangement will be in place.  Therefore, examining any other documentation that can support the claim that this was a loan would be helpful.  This could be text messages, emails, thank you notes, or proof of some repayments having already been made.  Ultimately, proving a loan without formal documentation can be very difficult.

How we can help

If you are concerned over what might happen to your family gift or loan when you separate, or if you want to ensure protection over a gift or loan before it is made, then please contact one of our expert family lawyers who can advise you on the best option to suit your circumstances.

For further information, please contact Kirsty in the family law team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Research suggests that nearly a third of recent sellers have suffered gazundering, which property pundits attribute to a downturn in the market. But, in some areas, the lack of suitable properties means there is still fierce competition for homes, with buyers trying to outbid each other via gazumping.

‘It is certainly a challenging time to be moving home,’ agrees Neil Shearer, a Conveyancer in the residential property team with. ‘Unfortunately, some buyers and sellers are taking advantage of the current market to renegotiate the agreed price, threatening to pull out if their demands are not met. The good news is there are things you and your solicitor can do to reduce the risks.’

Gazundering, and why it is a problem

With gazundering, the parties agree on a price, and the sale is proceeding, but the buyer then lowers their offer, threatening to pull out if the seller refuses to accept their reduced offer. Gazundering tends to be more common in a falling market, where the gazundering buyer exploits the seller’s fear that they may struggle to achieve the same price again.

Gazundering can happen at any time between accepting an offer and exchanging contracts. However, it is most common just before exchange. This is the moment both parties commit legally. As a seller, you will already have made a significant emotional and financial investment in your move, and the buyer knows this; it is the point at which their ultimatum is likely to have the most impact. The stakes are high, particularly if you are buying another property with your sale proceeds. If you call your buyer’s bluff and they walk away, you risk losing your new home too, particularly if your seller is in a chain of linked transactions. However, giving in to their demands could cost you dearly too. It can feel like a lose-lose situation.

Gazumping, and why it is a problem

Gazumping is the flip side of gazundering. It is generally more common in a rising market, but can happen whenever there is strong competition over a property. A seller accepts an offer from a buyer, and it seems like the purchase is progressing normally. However, the seller then accepts a higher offer from another buyer.

If this happens to you, your seller may invite you to increase your offer. This may secure your purchase, but it could escalate into a bidding war or a contract race. Even if the seller accepts your increased offer, you may find it hard to trust them, fearing they may try the same thing again.

Just like gazundering, gazumping can be costly emotionally and financially. If you decide to pull out, you will lose the benefit of the money you have already spent, for example, on a survey or conveyancing searches. If you are selling your own home, and are in a chain, it could also endanger that transaction unless you find a replacement purchase quickly or decide to move out anyway.

Is gazundering or gazumping legal?

Most people consider both practices to be unethical, but neither is unlawful. Either party may change their mind right up until exchange of contracts. It is only then that the transaction becomes legally binding.

The Government considered changing the law to prevent gazumping when it reviewed the house-buying process in 2018. However, it found this would be hard to do without creating other problems. It also took the view that a greater commitment from buyers and sellers earlier in the process could reduce the risks.

How you can reduce the risk of gazundering or gazumping

Until there is a binding contract in place, both buyers and sellers are at risk of the other one changing their mind. So, minimising the time gap between offer and exchange will help reduce this risk. Specific action you can take will depend on whether you are buying or selling.

Sellers

If you are a seller, you should address any issue that could delay your sale in advance. For example, your home may have an extension that does not have the requisite planning permission, or that needs consent under a title restriction. Applying for retrospective consent or taking out a suitable insurance policy could prevent this from becoming an issue later. Discuss your plans with your solicitor at an early stage; they can carry out a title audit of your property and pre-empt any issues.

It is also a good idea to consider your buyer’s position before accepting their offer. Ask yourself how proceedable they are. Generally, the more complex a chain the more scope there is for problems to arise. However, there is no hard and fast rule; sometimes a first-time buyer who has a mortgage offer in place may be less inclined to risk their purchase than a cash-buyer looking for an easy bargain.

Buyers

If you are a buyer, make your offer conditional on the seller removing their property from the market. Their estate agent has to tell them about any offer they receive. However, if they are no longer actively marketing a property, the chances of receiving a better offer will be a lot lower.

Ensure you can proceed quickly and efficiently. Arrange your finances well in advance, and have your solicitor and surveyor lined up. Monitor the progress of your sale. Return any papers your solicitor sends you for completion and respond to their questions promptly. If you show you are a serious proceedable buyer, any seller should think twice about risking their sale. Where possible, develop a rapport with them; they will be less likely to renege on a promise if they like and trust you.

Some other things to consider

If you are a buyer, you may also want to consider a lockout agreement. This is a separate agreement that prevents a seller from selling to anybody else for a fixed period. In return, you undertake to progress your purchase diligently.

Lockout agreements do not suit everyone; they involve additional expense and negotiating one could prolong your purchase and unsettle your seller. However, they can be useful in some circumstances. If you are concerned about gazumping, discuss this possibility with your solicitor.

It is now also possible to take out a home protection insurance policy. This will not stop you from being gazumped, but it can help with the additional expense you may suffer as a result.

How can I keep my transaction on track?

It may not always be possible to eliminate the risk of gazundering or gazumping, but there is a lot you can do to protect yourself. Either can be down to one party’s greed, but frustration and poor communication can also encourage these practices.

Due diligence at the outset, and understanding your buyer or seller and their motivation, will help. So too will having the right professionals on board. Our solicitors are proactive and communicate well, giving both parties confidence the transaction will progress as it should. That, and the swift resolution of any legal issues, is often the best safeguard against the perils of gazumping and gazundering.

For further information, please contact Neil in the residential property  team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

When a couple separates, the value of the family home is often the largest asset that they have to divide, and it can also be the most contentious.  This can be for a multitude of reasons, for example, one spouse or partner may feel emotionally tied to the house, or it may be next door to other family members.  You both may be concerned about having to move children from the home they have grown up in, perhaps to a different neighbourhood away from their friends and social activities.

There is also the financial risk, especially with higher interest rates, that it could be difficult to sell the house for a good price to ensure sufficient equity to rehouse each person in a suitable location.

‘While a clean financial break is normally what separating couples aim for, at times it may be appropriate to consider postponing the sale of the family home.  This can be achieved through what is known as a ‘Mesher’ or ‘Martin’ order,’ explains Kirsty Tighe, head of the Family Team.

What is a Mesher order?

A Mesher order allows for the postponement of the sale of the family home until either a certain period of time has passed, or an agreed ‘trigger event’ occurs.  It is used when there are minor children living in the family home, and it allows one of the spouses or civil partners to continue to reside there with the children.  The ownership of the property is not impacted, and the spouse or civil partner remaining in the home does not ‘own’ the home outright. The order will remain in place until the time stipulated in the order, or if the trigger event is reached.

Trigger events typically include:

• the youngest child of the family finishing full time education; or
• the spouse or civil partner, who has remained living in the house, remarrying or cohabiting with a new partner for a set period of time (typically six months).

Once the order comes to an end, the family home will be sold. Then the balance of the proceeds of sale will be divided in line with whatever terms has been ordered or agreed.

What is a Martin order?

A Martin order is similar to a Mesher order in that it postpones the sale of the family home until an agreed trigger event occurs.  The main difference is that a Martin order does not relate to minor children living in the house.  This order is typically used when there are either no children involved, or any children the couple had are already over the age of 18.

The trigger events in a Martin order usually stipulate the property can be sold if the spouse or civil partner remaining in the home is to remarry or to cohabit with a new partner for a period of time. On occasion, a Martin order can be made to cover the whole life of the spouse or civil partner remaining in the house.

These types of orders are usually only implemented when the court is satisfied that the capital from the former family home is not immediately required to enable both spouses or each civil partner to be rehoused.  Typically, the spouse moving out of the house will be wealthier than the remaining spouse.

Is postponement the right option?

This decision will depend on your circumstances.  In most cases, postponement will only be delaying a problem for you to deal with in the future.  Historically these types of orders were used much more often than they are today, however this sometimes led to problems when the house was later sold and some people still could not afford a new house.  Delaying matters meant they also had the added problem of having less of a working life left to secure a mortgage. Most separating couples now prefer to cut their ties and know where they stand financially.

On occasion, a postponement may be the right option.  For example, if you have very young children, you may not be returning to work until they are at school and postponing a sale could push forward the need to obtain a mortgage until a later date.  You could also be tied into a good mortgage deal at the moment, which you would risk losing if the property had to be sold now. If you are able to obtain a Martin order for your lifetime, this could also remove a significant worry about your future housing needs and the costs.

It is important to note that postponing the sale of the home is not the only option to enable you to stay in the house.  Our family lawyers will be able to advise you on the viability of other options, such as offsetting your interest in other assets to retain the family home without your former spouse or partner remaining as an owner.

How do I get a Mesher or Martin order?

If an agreement can be reached, your family lawyer can draft the terms of the order and apply to the court for it to be finalised.

If you cannot reach an agreement, then you can apply to the court for financial relief.  The judge, after hearing your case, will make whatever orders they deem most appropriate for the circumstances.

How we can help

If you are concerned over what might happen to your family home following separation, one of our family lawyers will be able to advise you on your options and discuss with you the advantages and disadvantages of seeking to postpone the sale.  We can also advise you on alternative options, and if you decide to proceed with a postponement we can ensure that appropriate trigger events are included to protect your interests in the future.

For further information, please contact Kirsty Tighe in the family law team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

When selling your home, you may recall the expression ‘buyer beware’. But what does this mean, and is it still relevant today?

‘Historically, the buyers in a conveyancing transaction have been responsible for satisfying themselves on a property’s suitability,’ explains Philip Walker head of the conveyancing team. ‘Nowadays though, the situation is more complex. There is more legal protection in place for buyers, who also now expect greater transparency.’

If you are selling a property, it is important to provide the correct information, and to get the right advice about any problems. Here Philip answers some frequently asked questions.

What information must I give to potential buyers?

Firstly, you must disclose any latent title defects you are aware of. A ‘latent’ defect is one which the buyer could not reasonably discover from inspecting the property. For example, a right of drainage or a restriction affecting the use of your home.

Secondly, the Consumer Protection from Unfair Trading Regulations 2008 places anyone acting as a business under certain duties which include not withholding information which the buyer may need to make an informed decision. While you may not be a business, the regulations apply to your estate agent and solicitor including to statements they make on your behalf.

Discuss any issues with your estate agent and solicitor early on. This will enable them to give you the best advice and will help your transaction to progress smoothly.

What information should I disclose when selling my home?

While the doctrine of buyer beware remains relevant, a rigid reliance on it may not help your transaction. Most buyers will expect you to provide information about your home, and replying to their solicitor’s enquiries is an established part of the conveyancing process.

There is a standard form for this (the TA6) which your solicitor will ask you to complete, covering topics such as boundaries, insurance and whether you have had any disputes with neighbours.

It is not a legal requirement to complete the form, or to answer all the questions. But, refusing to do so may raise suspicions and could delay or even jeopardise your sale.

What if there is something that may put off my buyers?

It is important to discuss any concerns with your solicitor early on. Do not be tempted to lie or tell a half-truth. If you do, and the buyers rely on that statement, you may be liable for misrepresentation. In a worst-case scenario, your buyers could reject the contract and you may have to pay them compensation. Misrepresentations can be oral as well as written statements; or even something you do, like removing a fixture, such as a paving slab, which was present when your buyer viewed the property.

A cautionary tale

Omitting or tailoring your answers to give a more positive outlook can backfire. For example, in Morrell v Stewart, the sellers had problems with foul water drainage. The Environment Agency became involved. Although the sellers told the Environment Agency they had solved the issue, their remedial works were insufficient.

In their precontract enquiries, the buyers’ solicitor asked the sellers if they had had any negotiations with any authority which affected the property. The sellers said they had not. The buyers’ solicitor also asked them if they had carried out any recent plumbing work or tested the drainage, to which they replied there had been no re-plumbing work or testing during their ownership.

After completion, the buyers discovered effluent overflowing and sued the sellers, seeking compensation.

In their defence, the sellers said they believed they had resolved the drainage issue and that the question about re-plumbing related only to internal work. However, the judge did not accept their argument and awarded £33,000 in compensation to the buyers.

The judge remarked that even if the sellers believed the drainage issue resolved, they should have disclosed it and the remedial works. The buyers could then have made an informed decision whether to proceed.

Unfortunately, the works had fallen short of the required standard. However, if the sellers had engaged the right professionals, who could have provided a warranty for the satisfactory completion of the works, and disclosed this to their buyers, the outcome may have been more positive.

How can my solicitor help me?

If there is something you think may concern potential buyers, talk to your solicitor. They can advise you on the best approach, one which will not expose you to unnecessary risk while hopefully reassuring your buyers.

Fortunately, most property related issues are not as messy as the one in Morrell v Stewart. Often there will be a relatively straightforward solution. For example, if there is a technical breach of planning or building regulations, it is usually possible to buy an insurance policy to satisfy any concerns.

Is there anything else I should know?

Yes, you should start organising your property information as soon as possible. If you want to sell your home, talk to us. We can explain what is needed to complete form TA6 and discuss any concerns you may have.

In England and Wales, a sale takes on average 150 days to complete, and the Government believes that providing more information upfront will speed up conveyancing and reduce the number of transactions falling through. There are now digital platforms which facilitate the collection and sharing of information in a single place, making the process quicker and more transparent. Addressing any issues at the outset can boost the chances of your sale completing smoothly and quickly.

How we can help

For further information, please contact Philip Walker in the residential  conveyancing team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.