What is a Property Adjustment Order?

Property Adjustment Orders in Divorce

As part of the divorce process, separated couples must decide how they are going to divide their assets and property so that each party receives a fair share according to the factors as set out in Section 25 of the Matrimonial Causes Act 1973.

This can often be a difficult and contentious issue.

More often than not, the biggest asset that a couple owns is their home and deciding what to do with it can lead to heated disputes. Difficult decisions must be made regarding whether the property should be retained by one person and if so, who will keep the house, or whether it needs to be sold and how the net proceeds of sale should be divided. If the house is to be sold in the future, then consideration will need to be given for the fact the other partner’s share is being delayed.

This is where a Property Adjustment Order comes into play.

What is a Property Adjustment Order?

A Property Adjustment Order is a legally binding order made by the Court under section 24 of the Matrimonial Causes Act 1973, or the Civil Partnership Act 2004 for the dissolution of civil partnerships. It is part of a Financial Consent Order which deals with the overall agreement reached between two former spouses or civil partners.

It achieves two main goals:

• Alters property ownership between the couple so their wealth is fairly distributed.
• Helps address questions like who should live in the family home while the children are still young.

The property in question can include the family home, investment properties or other real estate assets. The order can transfer property outright, adjust the ownership proportions, or dictate the sale of the property and division of the proceeds.

A Property Adjustment Order can also be one of the tools used when unmarried couples with children split up to ensure that adequate provision is made for a child’s needs.

What are the different types of Property Adjustment Orders?

A Property Adjustment Order can be made in various situations. The four most common types are:

• Transfer of Ownership Order: This Order may transfer the home from joint names into one person’s sole name, or from one person’s sole name into the other person’s name. Or it can transfer ownership into a trust or adjust ownership percentages.
• Order for Sale: Sometimes, the Court may order the immediate sale of the home and how the proceeds will be split between the spouses. This often happens when neither of you can afford to purchase the other’s share, or if you’re seeking to achieve a true clean break.
• Mesher Order (deferring a sale): Deferring the sale means that one party can continue to live in the property for a specified period, after which the property will be sold and the proceeds divided. A Mesher Order is often used when young children are involved so they have stability and keep a roof over their heads. The sale trigger could be the children leaving full-time education or turning 18.
• Martin Order: A Martin order is similar to a Mesher order, but it allows one party to remain in the property for life or until they remarry or cohabit with another person.

Why would a Property Adjustment Order be necessary?

While it is always better to agree the details of your financial settlement amicably, without going to court, it’s important to have your agreement formalised into a Financial Consent Order. If you skip this step and rely on informal arrangements, there is a risk that someone will change their mind or seek more money at a later date because your claims have not been dismissed, even when your divorce has been finalised.

If you’ve agreed a position on the family home with your ex-partner, then your solicitor can prepare the Property Adjustments Order as part of the overall Financial Order and have it approved by the Court. Then if one party fails to comply, the other party can apply to the Court for enforcement.

The Court will only need to get involved on the terms of the Order if you and your ex are at loggerheads, and you have been unable to agree what happens to the home. For example, you may be locked in a position where one of you wants to sell but the other wants to keep the property, or one person cannot afford to buy the other out. In this scenario, either party can make an application to the court for a Property Adjustment Order.

How is a Property Adjustment Order calculated?

The Court has broad discretion when making Property Adjustment Orders and the outcome will depend on the specific circumstances of each case. The court will consider several factors, including:

• The financial needs and resources of each party
• Welfare of any children
• Standard of living enjoyed during the marriage
• Each person’s financial and non-financial contributions to the marriage
• Future earning capacity

There is no single mathematical formula. The Court will aim for a fair division of assets but may consider factors such as one person’s greater financial contribution or giving priority to the primary caregiver for the children.

Can a Property Adjustment Order be made in relation to foreign property?

It is common in international divorces for the couple to own property in various locations outside of the UK. These properties make for a more complicated divorce case. It is often harder to value foreign property and there may be complex tax implications that impact what you can and cannot do with that property.

Generally, the Courts in England and Wales can make Property Adjustment Orders in relation to both UK and foreign properties, but getting the order enforced in another country can be challenging. You must seek advice from a solicitor with international experience as factors like international treaties will determine whether, from a practical perspective, you can enforce an Order overseas.

Are there any alternatives to Property Adjustment Orders?

While Property Adjustment Orders are a key mechanism for dividing property, they are just one type of financial order that may be made during divorce proceedings. Other options include:

• Lump Sum Orders, where one party makes a one-time payment to the other.
• Pension Sharing, where both parties share the value of pension funds accumulated during the marriage.
• Periodical Payments Orders, also known as maintenance orders, where one party makes regular payments to the other for a specified period or until a particular event occurs.

Solicitors play a vital role in helping couples determine the most suitable arrangements for their circumstances, and your solicitor will look at your family’s wealth holistically before deciding what type of orders will suit your specific needs. Quite often, the financial settlement will include several orders. The goal is to achieve a full and final settlement, and it’s always worth exploring alternative options to find the best solution for you and your family.

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