Divorce and Lease Options
Lease Options and Divorce – should you as a Lease Option Property Investor get involved when relationships fall apart? The sad reality is relationships do fail and very often the first question that needs to be addressed is how to dispose of the family home. We are asked every now and again whether getting involved in lease option deals when vendors are divorcing is a good idea or not.
Relationship breakdowns can come in many forms, and to consider if a lease option is workable you must first discover the depth and complexities of the breakdown itself.
For instance there is clearly a difference between the end of a marriage and the break up between boyfriend and girlfriend.
In England and Wales there are three considerations when applying for a divorce:
- Financial settlement. This is often referred to as ancillary relief
- How any children of the marriage will be effected and their welfare
- The ending of the marriage. This is often referred to as the dissolution
It is a court of law that makes decisions on how the divorce is handled based on an act of parliament passed in 1973 (Matrimonial Causes Act). The court will always consider any agreement reached by the divorcing parties.
However amicable a divorce, time inevitably plays a part. The question of time is central for the lease option investor.
Another factor which you need to take in to consideration is the psychology of each joint owner. Knowing the couples plans once divorce has taken place is often crucial.
Why do you think that is? What information do you think you would need to understand whether a lease option is suitable?
What do you suppose may happen if one or the other sellers plans to re-marry?
Legally, there is a chance depending on time scale that by re-marrying one of the vendors will waive their right to ancillary relief (financial settlement) which could affect the outcome of any lease option agreement you have in place.
Where there is little or no equity in the property both a lease option and a divorce may be easier to agree. For a lease option investor this provides an opportunity to weave the magic and put an agreement in place that allows everyone to move on quickly.
It is still possible to use a lease option in the situation where there is equity in the house. In my experience, a lease option can only work when the parties are fully agreed and committed to the future allocation of proceeds.
To summarise, as a lease option property investor, should we get involved in deals when vendors are divorcing? The situation and the solution needs to be clear to all parties and most importantly agreed by everyone. With any agreement you need the light bulb moment when all involved realise that with a little cooperation and the input of time a real solution can be found in a lease option agreement.