One of the most difficult questions a divorcing couple who have children have to deal with is how to make sure their children are properly provided for. And where will they live?
It is often bad enough as far as the children are concerned that their parents are divorcing, and then on top of that they face the prospect of having to move away with one of their parents from the home they are familiar with, possibly away from their friends and familiar school life.
Ideally, it would be least disruptive for the children for them to carry on living in the family home. However, that means that the parent who will mainly be caring for them would have to have the means available to buy the other spouse out of their share of the property AND carry on paying the mortgage on their own. For many, this is usually an impossible scenario.
The next obvious option is often for the family home to be sold, so that both the divorcing couple can take their agreed share of the equity out of the property and move on with their lives apart. However, this also depends on the primary caregiver being able to raise a big enough mortgage on their own to provide a suitably sized house for the children.
What if this is not possible or practicable either?
One option might be to apply to the court for a Mesher Order as part of a Consent Order. This article will explain what a Mesher Order is, what the divorcing couple has to agree on for the terms of the Mesher Order, and what some of the pros and cons are.
What is a Mesher Order?
The purpose of a Mesher Order is to defer the sale of the family home until a specific triggering event occurs and specify the proportion of the sale proceeds that each will receive at that time, whatever sale price the house eventually achieves. This triggering event will almost invariably be decided around the children’s needs and circumstances; for example, when the youngest child reaches a certain age, or finishes full-time education.
The Mesher Order is named after the divorcing parties in whose case the judge made the first judgement of this sort in 1980. It is sometimes also known as an “Order for Deferred Sale”.
The effect is that the children continue to live most of the time in the former family home with the parent who is their main carer.
A Mesher Order is always made by the Family Court. It is part of a Financial Arrangements Order if the couple have not been able to agree the financial split between themselves, even with the help of mediation or other types of dispute resolution, and the court has to make the decision. Where the divorcing couple have been able to agree on their financial settlement and ask the court to confirm it, the Mesher Order will be part of the Consent Order.
If you are considering a Mesher Order, it is much preferable for you both to have negotiated the terms that you can both live with and be in full agreement with it. Mediation is very often the best and most cost-effective way to have these delicate negotiations. Despite the fact that you are divorcing, a Mesher Order is a longer-term commitment that you will both have to stick with and may not be easy. So, you really need to be in full agreement that this is best for your children and you both commit to make it work.
How does a Mesher Order work?
The court will only issue a Mesher Order if they are satisfied that it is the most appropriate way of ensuring the children’s living needs. The Mesher Order outlines exactly how the property is divided, who has to pay the mortgage while the order is in force, who is responsible for repairs, maintenance and upkeep of the property, what the event will be that triggers the sale of the property, and what percentage of the net proceeds of sale after repaying the mortgage and all costs relating to the sale each will receive.
Usually, the Mesher Order gives the primary care giver of the children the right to continue living in the former family home with their children until the trigger event occurs. The intended effect of this is to give stability and a familiar environment to the children through their parents’ divorce.
Once the trigger event occurs – which might be a fixed date in the future (e.g., the youngest child’s 17th birthday), or a time that can’t be determined exactly at the present time (e.g., the youngest child finishing full-time mainstream education) – the house must be sold and the proceeds divided as the court specifies in the order.
The non-resident spouse therefore retains a financial interest in the former family home even though they no longer live there, and will get their share paid to them at that point in the future. So, if the property increases in value between now and it being sold in the future, they will share in that increase in value even though they no longer live there.
There are two options for the legal ownership of the property for the time the Mesher Order is in place. Either the property remains in joint names, with both remaining jointly responsible for the mortgage, or the property can be transferred into the sole name of the parent who will be staying there, with the other parent having what is known as a “chargeback” – a legal charge which protects and secures their financial interest in the property.
Elements of a Mesher Order
Child-centric approach
The children are the court’s centre of attention when deciding whether a Mesher Order is the most appropriate option. If their needs can be met by selling the house and the main care giver buying a smaller one in the area, that would often be the preferred option – even though the proportion of the sale proceeds going to that person would be much more than the other parent would receive.
Trigger event
A lot of thought must go into the package of trigger events. The main one – around the children – might be straightforward enough, based on them reaching a certain age or finishing education. But what about other events that might be relevant? For example, how would the parent who is leaving the family home feel about their ex-spouse starting to cohabit with a new partner in the former family home, in which possibly a large amount of their capital is tied up? Should a trigger point be when the children’s main care giver is able to return to work full-time and is able to raise sufficient mortgage in their own right to buy the other out?
Financial arrangements
The Mesher Order will specify what proportion each will get when the property is eventually sold at the time of the trigger event. The exact percentage depends on the couple’s individual circumstances, including how the rest of the finances have been balanced – for example, pensions. If the divorcing couple can agree their financial arrangements themselves, possibly with the help of mediation, this will be something they have both agreed on. If the court is having to make the decision, the exact split will be at the court’s discretion.
It is important to remember that the percentage split is of the amount the property eventually sells for, not the valuation at the present time. So, both sides of the divorcing couple benefit from any increase in value. This might be a significant sum which cannot be predicted at the time the Mesher Order is made, particularly if the trigger event will not happen for several years. Conversely, of course, the property value might not be as much as it is now when the property has to be sold.
The Mesher Order will also specify who is responsible for the ongoing mortgage repayments and the repair, maintenance and upkeep costs of the property. Both spouses must keep to these terms until the triggering event occurs.
Change in circumstances
Sometimes, circumstances change unexpectedly. For example, the financial circumstances of the spouse remaining in the property might change earlier than expected and they might be able to take on the mortgage and property by themselves independently. If both parties agree to end the terms of the Mesher Order early, they can do so without going back to court. However, if someone’s circumstances change and they do not both agree to change the terms of the arrangement, either party can apply to the court to revisit the terms of the Mesher Order in the light of the new circumstances.
Pros and cons
There are advantages and disadvantages to a Mesher Order:
Pros
- It can be much less disruptive for children at this very unsettling time to stay in the home they are familiar with, and more conducive to a stable home environment.
- It can be advantageous if there is negative equity in the property at the present time – i.e., the mortgage is higher than the amount the house could be sold for now.
- It might be the best way of keeping children close to their school.
- If the children are close to school leaving age, a Mesher Order could be worth thinking about as a short-term solution to help lessen exam stress.
- If circumstances change and both parties agree to terminate the arrangement early, there is no need to go back to court.
Cons
- It might not be a good long-term solution, particularly if the children are young.
- A Mesher Order creates financial ties between a divorcing couple, possibly for a long time, and stops both of them from properly moving on. A clean break might be best for all concerned.
- The Mesher Order defers the sale of property to a specified time in the future – who knows if that would be a convenient time to sell?
- Depending on how long the trigger points are away in time, it could affect both parties’ ability to raise a mortgage when the time comes. They will both be closer to retirement age and might only be able to get a mortgage for a shorter repayment period, which can make monthly repayments much higher.
- The financial future for both parties remains uncertain for as long as the Order is in place.
- It ties up capital, especially for the party leaving the property – possibly for several years.
- It can seriously get in way of the person leaving the property getting a new mortgage for a new property, as they will already have existing property commitments which a mortgage lender would have to take into account.
- There are potential tax implications.
- External events – for example, the insolvency of one party – can force the arrangements to be ended prematurely.
Legal advice
It is always advisable to have independent legal advice when negotiating arrangements around divorce settlements and property, but a Mesher Order is a very complex topic and should not be considered without legal advice. As it defers a final financial settlement until a later date, and sometimes a much later date, expert financial advice should also be taken.
Conclusion
A Mesher Order is one of the options available to a divorcing couple to ensure a fair division of assets and make sure that as much stability as possible is provided to their children. By postponing the sale of the family home until a specified triggering event, it allows children to maintain their familiar living environment while enabling both parties to benefit from the property’s value in the future. Even though it initially might sound an attractive option, particularly for the person remaining in the property, it is not a straightforward arrangement and has many disadvantages. As with any financial arrangement during divorce, it is crucial to seek professional legal advice to understand the specific implications of a Mesher Order in your situation and to properly draft the terms.
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