FAMILY LAW ARTICLES
HOW WILL COVID-19 AFFECT MY PROPERTY SETTLEMENT?
The COVID-19 pandemic continues to unfold around the world, bringing human tragedy, economic downturn and social chaos on a scale we’ve not seen in our lifetime.
We all have our own worries and fears and – for a variety of reasons – some are doing it tougher than others. One group with heightened concerns is those going through a divorce or separation.
We’ve recently discussed how parenting orders might be affected by the COVID-19 crisis. Here, we unravel the uncertainty surrounding the financial aspects of separation and divorce and look at how the crisis might impact property settlements.
COVID-19’s impact on the property settlement equation: asset value
The first step in working out a fair and equitable property settlement is to put a value on the assets and interests accumulated during your relationship. These include the family home, investment properties, cars, artworks, furniture, cash, shares, inheritances, business interests, superannuation and more.
The value of many things on this list have been impacted by the current crisis. The current ban on open houses and on-site auctions, combined with massive job losses and the impact of national and international economic conditions, have some experts predicting a downward spiral in house prices. Meanwhile, the recovery of the stock market following the COVID-19 crash is still subject to speculation. A decline in share values will, of course, have a direct impact on superannuation entitlements.
The social distancing and isolation measures aimed at preserving lives have also caused the closure of many businesses, with tourism, retail and hospitality hit particularly hard. As major airlines go under and household brands temporarily close their doors, many other business owners are also wondering how they’ll survive the crisis.
Other financial implications of COVID-19: loss of income
It’s not just the value of assets that have been impacted by the pandemic. Many have lost part or all of their income. The jobless rate is expected to double from 5.1% to 10%, with 1.4 million Australians expected to be out of work.
A loss of income has the potential to impact on property settlements since part of the process of determining a property settlement involves considering the future needs of each party, including their income earning capacity. A person’s capacity to continue paying existing spousal maintenance payments or child support payments may also be affected by the cash flow crisis that a sudden loss of income can bring.
Property settlements and financial orders complicated by the pandemic
The personal impact of this pandemic is unique to each of us, as is its impact on family law parenting and financial circumstances.
The only thing that is clear is that many issues and complications may be thrown up as a result of the crisis. Consider these hypothetical scenarios:
- Mark and Jenny divorced three months ago. Jenny sees a silver lining in this crisis – she wants the house to be revalued, expecting it to be a lower value, because she wants to keep it. Her loan approval runs out in six months and she says she wants an urgent settlement so she doesn’t have to reapply and risk the banks refusing a second application. Mark, on the other hand, would prefer settlement to be slowed down to give an opportunity for the market to recover, so the value of the home may increase and he gets a better settlement. Some experts are saying this won’t happen until 2022.
- Laila and Sam are newly separated. Sam’s café is closed temporarily and he’s on his knees financially. He wants to sell some of their shares to keep his business afloat. Laila is objecting and says they should wait until the market recovers.
- Noa and Sara divorced amicably but are in a long-running dispute about how Noa’s aeronautical engineering business should be factored into the property settlement equation. Noa’s accountant now says the business is worth nothing – and Noa is keen to lock in the property settlement now.
What can I do if I’m concerned?
Do you find yourself faced with the type of issues and questions our couples in the hypothetical situations above are experiencing?
First, it’s important to note that the Family Court of Australia has assured the community that it remains open, along with the Federal Circuit Court of Australia, and that the courts will “continue to perform their duties during this time of crisis.” Most hearings are being conducted via video-conferencing through the use of Microsoft Teams or other platforms, or by telephone. Mediations are being conducted electronically and through other safe means.
However, the above scenarios highlight the potentially greater need for urgent orders during this crisis. While the courts are still working, they’re working differently and perhaps more slowly. So, unless a party is in real need or financial trouble, it may be even harder to get the Court to act in these current conditions.
There are things you can do to navigate your way through this unchartered territory, though.
It may help to:
- Be very proactive about assessing the market and where it is headed so you can pre-empt any issues on the horizon.
- Subject to the advice of our Sydney family lawyers, get independent valuations of assets and advice about current market and predicted future factors and trends. This often forms basis of evidence in court proceedings. For instance, in Mark and Jenny’s case, Mark would need to be able to convince a court by way of expert evidence (possibly an expert property valuer and even global economist) that Jenny should not be able to try to sell the property to 2022.
- Subject to the advice of our Sydney family lawyers, seek advice or a report from a forensic accountant or an expert in the stock market on why you should or shouldn’t sell shares at the moment.
- Talk to our Sydney family lawyers about an urgent application if you’re unable to comply with existing orders or are in financial distress (and, for example, need an asset to be sold urgently to help you get through the next few months).
- Get advice also on what interim or alternative arrangements are available if you’re unable to pay spousal maintenance or child support.
- Consider hardship assistance from the Bank if you have a mortgage and are struggling to pay, regardless if your partner does not agree to this course.
While it is encouraged to be civil and try to resolve issues with your separated partner, we highly recommended you have at least sought private and confidential family law legal advice – including about strategy – before your do so. Without this advice, there may be some information you gather or certain pressing objectives that you share, that maybe seized upon by the former spouse to undermine your best interests.
While the pandemic is affecting every aspect of our lives – including family law matters – it’s important to remember that we’re all impacted and that there will be an end to the crisis. If you need help in the meantime, whatever the problem is, speak up and reach out for help and support.
If you’re concerned about your how COVID-19 is likely to impact your family law financial settlement, contact our Sydney family lawyers today for tailored advice about your family law situation.