Beware of Financial Agreements on Divorce without a Clean Break Order

In this article Rebecca Woodley talks about the importance of getting a Clean Break Order in the case of separation and divorce.

Every client I see in relation to divorce is provided with the same advice. A divorce does not end financial claims. This means, in order that neither party can make a further financial claim on the other, a separate application must be made to the court for a Clean Break Order. Providing the parties are agreed, this is a paperwork exercise so no-one has to attend court. We prepare the paperwork which is approved and signed by the parties and the lawyers. The cost is usually based on the Solicitor’s hourly rate. I usually estimate £600 – £800 plus vat and there is a court fee of £50. The other party does not have to be represented but often requires some advice and this is recommended.

What is unfortunate are those amicable cases where the parties agree to wait until they have been separated for 2 years before proceeding with the divorce. They agree the arrangements for the children, they agree financial matters. Maybe the house will be transferred to one party with the other party receiving a lump sum. No solicitors are involved, everything is dealt with by agreement. The problem with this is that the agreement is not legally binding.

I have recently seen a client where this is exactly what happened. The wife retained the house and paid the husband a lump sum but did not apply for a Clean Break Order. She assumed the husband could not come back for more. Unfortunately the formula applied by the parties to calculate the husband’s lump sum was not in accordance with the way the court would deal with it. The husband was paid less than he was entitled to. The value of the property had also increased over the last 2 years putting the wife in a better financial position than the husband. Also the husband had not invested well, he had not purchased property and his lump sum had reduced putting the wife in an even better financial position than the husband.

The husband then instructed solicitors in relation to the divorce. He was also advised the financial agreement was not legally binding and he could claim a further lump sum from the wife. The husband’s solicitor wrote to the wife accordingly. The wife has had to co-operate in relation to reassessing an appropriate lump sum payment to the husband. With no agreement and no Clean Break Order the husband can apply to the court for a further lump sum payment. If the court feels it is appropriate they could order a sale of the property to ensure the husband has received an appropriate lump sum.

The wife is understandably distressed. She thought she owned the house outright with no further claim by the husband possible. In fact she has now agreed to pay him a further lump sum of £35,000.

When a relationship breaks down most people try and deal with matters by agreement. They are often concerned that instructing a solicitor will be expensive and that the solicitor will make the situation worse. They believe it is more amicable and preferable to reach an agreement without involving a solicitor. In fact the very opposite can be true.

We are here to represent your interests. In a great many of cases all I am doing is advising on the agreement the parties have reached themselves and making that agreement legally binding. My clients then have peace of mind, knowing that that the other party cannot make any further claims against them or change the agreement.

Rebecca Woodley is a solicitor in the Family department at Fraser Dawbarns. She is a trained Collaborative lawyer and a member of Resolution, an organisation of family law professionals.

Find out more about divorce services at Fraser Dawbarns