It is worth remembering that it is very important in quite a few situations to keep your eye on the implementation of the terms of settlement post separation or divorce. Many people are so glad to put this unhappy period of their lives behind them that they completely forget to monitor the implementation of their settlement agreement or terms of their court order. Others may think that we, the solicitors, will implement the terms of their settlement, which we do, but only up to a point, usually the immediate aftermath. Where parts of the agreement or terms do not come up for implementation for several years, we do not generally monitor that going forward. We will rely on you, the client, to revert back to us when that day comes about where part of your settlement now needs to be implemented. This will be articulated to you when you are settling your case or discussing the court order outside of court and that will be that. However, because of a recent spate of “aftermath situations” I have written a letter to go to my clients on this matter which hopefully will imprint the need for vigilance on their minds.
Since the last recession, the Banks and financial institutions have tightened their controls and from a global perspective, that is largely desirable. There are, however, a few perhaps unintended consequences of tightened financial controls. One of these is the inability of many spouses to obtain loans or have loans transferred to them in their own right. The Banks generally prefer to have two parties on the hook for the debt rather than one. It is also quite often the case that despite paying the mortgage for several years single-handedly, you will not qualify to take the loan in your own name due to the level of your earnings etc. This means that if part of your settlement is to have the house transferred to one party subject to the mortgage thereon, the Bank or financial institution’s consent will be sought to such a transfer. It is important to remember that the Bank is not a party to the proceedings. The court has no power to make orders against the Bank as such in a family law case. Many couples knowing that the Bank will not give their consent for various reasons will endeavor to deal with the situation without referring to the Bank at all. They may enter into a deal with their ex which is that the ex stays in the house and is responsible for the mortgage thereon. They may be granted an exclusive right of residence in this circumstance or a transfer of interest could be intended and documented. What, however, happens if the ex does not keep up payments of the mortgage and goes into arrears. Generally, there is an indemnification clause or liberty to re-enter clause. The import of these, however, needs to be explained to you by your legal team. The Bank could then move in and seek agreements from both parties about the payment of the mortgage and the arrears. If you have not been monitoring the payment of the mortgage you might find yourself in for a nasty surprise. Even though, your ex has agreed to pay the mortgage you cannot afford to not monitor this as you are on the hook for that mortgage along with your ex as far as the Bank is concerned. The Bank is not bound by the indemnity clause. You have to think carefully at the time of settlement as to how you will get around this. One way is to ask the Bank to send you the bank statements to your email address as well as to the family home or to both your email addresses independently. Most people in this situation will not want the Bank to know that they have separated in case that makes the Bank move in so asking for the statements by both of your emails will raise less suspicion clearly than giving them two addresses. You can also ring up the Bank as a joint owner and ask for updates but you have to remember to do that regularly.
If you do receive information from your ex-spouse that they intend to sell the house because they can no longer afford the mortgage, you are on notice that there is a likely arrears situation no matter what you are told. If you are told that the ex has come to a deal with the bank and she/he is no longer liable for the full debt having made a deal, be on red alert because making a deal with one spouse does not mean, as far as the Bank is concerned, that the other spouse is off the hook. You could find yourself liable for all of the shortfall when the mortgage is discharged. The first thing you should do, if you are told that there is an arrears situation or that the house is being sold, is make it your business to become fully informed. Do not, as many people seem to do, run away from the situation and pretend it will be alright. You need to know if your ex has entered into an agreement with the Bank to discharge the arrears and what that deal is. You may need to amend the terms of your agreement or the Order to reflect this change. You should almost certainly alert your solicitor to put matters in writing so there is a full record of any new agreement. You should go back to your family law solicitor as opposed to a new solicitor to deal with this. Why? Because it will probably cost you less since your family law solicitor can get up to speed quickly whereas a new solicitor will have to take up your file from the family law solicitor and read their way into it. Remember that the Bank cannot notify you of anything if they do not have a way of contacting you. They will not go to any trouble to find you. Correspondence from the Bank will go to the family home where for the purposes of this example, the defaulter is resident. The Defaulter is unlikely to want to come clean with you because they are likely to be in breach of the court order apart from other issues and will not want to tell you that until it is too late. It is, therefore, up to you to keep in touch with this situation rather than rely on your ex to give you information that may not be in their best interests but is certainly in yours.
There is another little twist to this kind of situation that few people seem to have on their radar. The sale of the family home, when you are still on title and on the mortgage, is an event that you should fully participate in i.e., be a party. That arises because you still are an owner of the house and still on the mortgage. You should not just sign something and forget about it. You are not a legal expert, do not sign any legal documents without the benefit of proper legal advice. If you go to a solicitor who was not involved in your marital or partnership breakdown, and he or she has not got the background to the situation, then they cannot be expected to alert you to all the pitfalls and advise you as to what you need to do. What is this little twist? It is the Personal Insolvency Agreement. These seem to have become very fashionable. The party residing in the family home (A) gets into arrears and you (B) know nothing about this as all correspondence is going to the family home and you(B) are not monitoring it. The arrears situation gets out of control and A decides to sell and clear as much of the mortgage as they can. A goes to a PIP (a personal insolvency practitioner) usually on advice from an accountant or solicitor and has the PIP negotiate a deal with the Bank and other creditors. This is what is then known as a PIA (personal insolvency agreement) which is then brought before a Judge and eventually approved and becomes a legal agreement. This can all happen without you, B’s, knowledge. You B, will then be in a very awkward position as the Bank is now going to come after you for any unresolved debt. You will be surprised at how quickly the Bank will find out an address for you in this situation. Possibly to rub salt in the wound it will come from your ex, A, as they disappear over the brow of the hill into debt-free bliss. Remember that even without an arrears’ situation, A could decide to sell knowing that the market price will fall short of what she owes. She could then tell you that the house is being sold and she has entered into a debt forgiveness situation with the bank whereby you, B, infer that you are free and clear under this debt forgiveness situation. That would be a mistake unless you hear it from the Bank directly preferably in writing or your solicitor does.
In general, the advice is that as soon as you hear anything that makes you feel there are deals afoot about which you have heard nothing officially or you receive any form of official notification, you are told that it is all in hand or that agreements have been entered into and you have nothing to worry about or some other innocent sounding story, you absolutely must contact your solicitor asap and find out what is actually going on. You could save yourself an awful lot of money.