The family home is often central to financial settlement negotiations during divorce. A Mesher Order is one way the courts and divorcing couples can deal with the property when immediate sale or transfer to one party is not appropriate.
The name comes from a divorce case heard in 1973 in which a wife was allowed to stay in the family home with her child until the child reached 17. The orders have come to refer to situations where one spouse remains in occupation until a ‘trigger’ event occurs. For example, when a child finishes education.
When the trigger event occurs the non-occupier is entitled to realise his or her interest in the property. The Mesher Order (or Mesher Agreement) will stipulate relevant trigger events as well as the non-occupiers exact share or interest in the property.
Who Owns The Property When The Mesher Order Is In Force?
The property may be held jointly on a trust for sale until the trigger event occurs. Alternatively the home may be transferred to the occupying spouse with the non-occupier taking a charge over it. Again this charge can be enforced when the trigger event occurs.
What Are Trigger Events?
It is up to the parties and the court to decide the circumstances in which the non- occupying spouse can obtain his or her share. Typical trigger events include:
- Children reaching 18 or completing full time education
- Remarriage of the occupying spouse
- Death of the occupier
When the sale of the home is not triggered by an event related to children of the marriage the courts make a ‘Martin Order’, which operates in a similar way to a Mesher Order.
What Are The Advantages Of A Mesher Order?
- In cases where there are limited assets, and the family home is the most significant asset a Mesher Order is a useful way to minimise the disruption to family life caused by a divorce.
- Both parties keep a financial interest in the property that may well appreciate in value over time.
- When there are limited funds the court will prioritise the needs of the family and in particular the children. If selling the home immediately would cause hardship that could be avoided by postponing the sale, a Mesher Order becomes an attractive option.
- If there is negative equity in the property, the housing market is slow or a sale would mean the loss of an existing, attractive mortgage rate it may make sense to postpone the sale.
Are There Any Drawbacks To A Mesher Order?
Yes. Often they should only be used as a last resort. The orders were extremely popular in the immediate aftermath of the Mesher case. But as events triggering the sale of family homes started to occur it became clear that the orders were in many cases simply postponing financial uncertainty.
For example, when the time comes to sell the property there may not be sufficient equity to enable the occupying spouse to discharge his or her obligation to the non-occupier and purchase another home. It may be difficult too for the occupying spouse to obtain a mortgage – he or she will be older and may have limited earning power.
There are some other negative aspects of Mesher Orders, including
- They inevitably reduce a divorced couple’s ability to lead completely separate lives. They will usually have to deal with each other about running costs and repairs to the home.
- The non-occupier may well resent having to wait so long to get his or her money out of the property.
- In addition if the non-occupier purchases another home while the Mesher Order is in force, CGT may be payable on the funds received when realizing his or her interest in the original family home.
A Mesher Order is a useful tool. But only in limited circumstances. The difficulties that can arise when the non-occupying spouse wishes to realize his or her interest in the onetime family home must always be borne in mind when considering whether or not this type of order is suitable in your case.