19 Jul How does the COVID19 Pandemic affect my Property Settlement?
Many families have found separation in the middle of the COVID19 pandemic particularly daunting. Despite COVID19, clients will still find themselves needing to obtain advice about separation and finalising any property division between them. Separation itself leads to uncertainty about your financial future and those fears and uncertainties are likely to be heightened in the middle of the panic of a global pandemic.
Clients should consider getting advice early-on. In this article, we have outlined some of the ways we consider that COVID19 has affected negotiating property settlements after separation.
What is the impact of COVID19 on property values?
COVID 19 has created a sense of uncertainty for clients in relation to concerns about whether the current situation has or will affect the value of their assets. When we went through it last year there were predictions of a 20 per cent decline in the property market but that never eventuated so we don’t know what impact there will be, this time around, if any.
In dealing with Financial Matters, the first step a Court takes is to Identify and Value the assets to be divided between the parties. Consideration is given as to the value of the assets at the date of the Hearing or at the date that the date that the parties seek advice, i.e. the current value.
We need to rely upon experts, being registered real estate valuers with experience in family law matters as to their advice about how the current COVID 19 situation has and might affect the value of assets.
Many of the Expert Valuers advised this time last year that whilst they were in unchartered waters, the way that they value the parties’ interests in assets has largely remained unchanged: that they still need to consider the value of the asset at the date of the valuation.
Fortunately, we didn’t see the predicted 20% drop in the Sydney property market and instead we saw a boom in the market. However there are many different factors that will drive what happens in the property market moving forward.
When engaging in settlement discussions, parties will need to have regard to the value of the assets and whether there is any predicted potential impact of the Coronavirus in relation to any proposed sale or retention of their property. These will need to be factored in to any property settlement discussion.
What is the impact of COVID 19 on Business Valuations?
For Expert Accountants valuing businesses of separated couples, the valuations will generally be performed the same way they were performed before COVID19. The valuations will be based on the individual circumstances of the case and the financial statements of the entities being valued as provided to the Accountant at any given date.
COVID19 has had significantly devastating effects on many businesses, leading to closures through the first wave, and near closures with businesses having to look to survive the second wave. However, there are some businesses that have thrived during COVID, and their value has increased. There are some businesses that have remained largely unaffected.
Whilst we have had the benefit of making it through the first wave of impacts, the second wave of impacts is still largely unchartered waters. The Accountant’s principles and methods of valuing a business still remain the same.
Whilst we are still at early days in assessing the effects of COVID19 on businesses in family law matters, the Accountants will give regard to the latest financial statements available that reflect the performance of the individual business as at the date of the valuation.
It may therefore take some time before the flow-on effects of the current COVID19 wave and lockdowns will be felt by the individual business and will be present in the business’ financials, to be considered relevant in any Valuation. This will of course lead to areas for argument and negotiation between the parties.
Consideration of a reduced income in property settlements
The first wave of COVID 19 resulted in a significant increase in unemployment and now Sydneysiders are feeling it all again with the current lockdown.
Many people have experienced loss of employment, loss of business or a reduced income. The changes to a party’s income, whether caused by loss of employment or working reduced hours, will affect the advice we give on property settlements.
When dealing with a property settlement, the financial circumstances of both parties is a relevant consideration under S.75(2) of the Family Law Act. The change to a party’s income will affect our advice as to a likely settlement outcome.
The difficulty with COVID 19 is that it is hard to predict whether the current change to a person’s income and earning capacity is a long-term matter or not. The Court must also consider the earning potential in the future of each of the parties. Although a Court must look at the financial position of each of the parties at the date of the Hearing, evidence as to imminent job loss or insecurity may be an important factor to address in these uncertain times.
A change in income of either party, may also affect the ability of the parties to pay for a mortgage or other outgoings as to a property or to meet child support obligations. This will also need to be considered in any property settlement discussions.
What do I do when there is a ‘Stay at Home Order’ and I want to leave the house because of violence?
The Sutherland Shire NSW Police have published on their local Facebook page that a Stay at Home Order does not mean that you have to stay at home where there is Domestic Violence. That they still prioritise domestic violence over the ‘Stay at Home Order’ and that you should ring emergency 000 to report the matter to Police and seek assistance.
Does COVID19 affect my ability to receive advice about my property settlement? Yes, we are still open
Here at Solari and Stock it is ‘Business as usual’, although the way we provide our services may be slightly different post COVID19. During the lockdown, we are not seeing clients in person unless essential and appointments are made. Most of our staff are working from home and we are able to see and speak with clients via zoom videoconferencing or telephone.
We expect to get back to seeing clients in person whilst exercising social distancing and appropriate cleansing of the office before and after a client’s attendance after the restrictions ease.
In these unusual and uncertain times, when a person makes a decision to separate, it is more important than ever that he or she seek early legal advice as to their likely entitlement for a property division.
We can provide expert advice, including a consideration of any impact of COVID 19 consequences, with regard to the Family Law legislation, the individual facts of the case, the values of the parties’ assets and liabilities, and the current and future financial position of the parties. We aim to advise our clients as to all their options moving forward so that our clients can make well-informed and confident decisions to achieve their best outcomes for their future.
If you have any questions about how COVID19 has affected you or your family law matter personally, just ask one of our Family Law Team. Contact us on 8525 2700 or click here to request an appointment.