Part 2- REALISEABLE ASSETS
Part 2 of your financial booklet relates to your capital resources which could, in practice be turned into cash, which is why they are referred to as ‘realisable assets’ and cover a variety of assets, as you will see.
Some or, indeed, many of these assets may have costs and tax implications connected with transferring or cashing them in, which need to be considered when valuing them, such as Conveyancing costs or Capital Gains Tax, as you will now see in Part 2.1 below Properties section,
This valuation process of deducing cost and any tax connected with a sale or transfer is often referred to as ‘netting down’.
This ‘netting down’ valuation process is necessary to achieve a fair financial agreement even if there is no intention of selling or transferring the asset as part of your financial settlement.
Please have a look at the divorce manual chapter-9 How to reach a financial agreement in 5 stages, which explains this in more detail
So, let me first turn to Part 1.1, the Property section.
Part 2.1 PROPERTIES
When it comes to properties, whether it is your home, a rental or an investment property the aim is to work out the net sale value or equity for each property, whether or not the intention is to sell it.
Working out the net value will involve agreeing a value for each property and calculating what needs to be deducted, such as any mortgages and professional fees, connected with a sale.
Let’s look at the information needed in more detail.
Land Registry
We recommend that you obtain a copy of the property title information from the Land Registry for each property using the weblink we provide, to check that there are no surprise entries on the Register.
If you need any help with obtaining or understanding the Land Registry information, please use the Gov web link provided and if you need more help ask your Mediator to recommend someone.
Valuations
You will need a few Estate Agents to visit your property and provide a realistic sale value, putting this in a letter for you to share with your former partner.
Ideally, obtain 3 or 4 values to help you agree on a realistic sale value for each property.
Perhaps invite your former partner to speak to the valuation agents if needed, to reassure themselves.
Please do not fall into the trap of trying to keep the valuation as low as possible, if for example you are the one wanting to remain in the property and buy out your former partner.
The price of failing to agree valuations is that you might have to instruct your solicitors to select and instruct a Chartered Surveyor to carry out a full valuation which is likely to cost you many hundreds of pounds and take a lot longer.
Mortgages and Costs of Sale
Please ensure that the mortgage details are accurate and up to date.
We suggest using an estimated sale costs figure of 2.5% to take into account EA 1.5% and 1% to cover Solicitor conveyancing costs and fees.
You can of course check how much the Estate and Solicitors would actually charge and use that figure, if you prefer.
Ownership
The Land Registry title documents will show who the Legal owners are. This may not be the same as the Beneficial owners.
Sometimes, it is not as clear who the Beneficial owners are since two people can be Legal joint owners but own the Beneficial interest in unequal shares.
In this case, there is usually a Trust Deed setting out the Beneficial ownership shares.
Legal ownership is about the Title and control, whereas Beneficial ownership focuses on the economic benefits derived from the asset.
Understanding these differences may be important to be able to reach a fully informed fair financial agreement in mediation
In some cases, people other than you or your former partner/spouse may be claiming to have a Beneficial interest in the property because they provided the purchase deposit or spent money on improvements to the property.
This may be a parent or other member of your family
If you believe that this is the case, it is important to explain this here and be able to provide evidence of this for discussion in mediation.
Capital Gain Tax
If the property has not been your main home, there is a good possibility that a sale or transfer would trigger a CGT charge.
This needs to be considered in calculating the net value of the property even if there is no intention, at the moment, to sell or transfer the property, as part of the divorce settlement.
We provide a link to the Government website to provide more information with this.
If you need one of our financial experts to help with this your Mediator can recommend someone