Divorcing couples face living under the same roof as house prices slide

LEGAL ANALYSIS

"The last time the market crashed in the late Eighties and early Nineties, people were deferring the decision to commence divorce proceedings," recalls Sue Bland, head of family law at Mayfair solicitors Gordon Dadds. "I don't think we have quite reached that point yet, but it's a possibility."

If divorce proceedings are already under way, the couple may have to live separate lives under the same roof until the market picks up, perhaps next year. Alternatively, one of them might move into expensive rented accommodation.

One option coming back into fashion is to defer the sale for some years, perhaps until the youngest child has left college. By then, the house may have recovered its value.

A typical agreement could allow the wife to remain in the house until she cohabits, remarries or dies. After that, it would be sold. The husband would register a legal charge on the house to ensure that he received whatever share of the proceeds had been agreed. If the husband is the main earner, might he raise a loan and buy out his wife?

The High Street banks are not likely to be interested but it could be worth approaching a mortgage broker for advice. And private banks may be willing to assist.

It is not widely known that private banks are also involved in funding litigation at the top end of the divorce market. They are interested in women with no money of their own seeking a divorce from husbands who control the family assets.

Loans to cover solicitors' bills are much more readily available than they were even three or four years ago - but generally to wives who are expecting to walk away from a marriage with what Bland calls a "significant seven-figure settlement".

Some clients will ask their lawyers to defer all their fees until the case is over. But solicitors are not banks, Bland says. "If you do that too often, you are left with severe cashf low problems."

SG Hambros was the first bank to spot the potential benefits of funding divorces, she tells me. They were followed by some of the private arms of the big banks - Coutts, for example - and by private bankers such as Duncan Lawrie.

The risk for the banks is that these loans are normally unsecured. Solicitors must undertake to repay the loan from the divorce settlement but there is nothing to stop the client from moving to another solicitor before the case is over.