Value of divorce settlements halves as economy splutters
Published 14/07/2013 | 05:00
Divorce settlements in this country are now less than half what they were during the Celtic Tiger years, according to top divorce lawyers.
Warring Irish couples will therefore no doubt be enviously eyeing up any bumper divorce settlement secured by Nigella Lawson after her split with Charles Saatchi.
The dramatic collapse of the Irish property market is at the heart of the dwindling settlements, according to Muriel Wall, partner with the family law firm, Walls and Toomey.
"We've gone back to the sort of settlements we had in the late 1980s and early 1990s when courts wanted to know that you had a roof over your head and enough money to put food on the table," said Ms Wall, who has specialised in family law for more than 30 years.
"Property is the main asset in between 50 and 80pc of divorce cases. Property values have gone down by about half since the boom – so many divorce settlements have gone down by more than that."
Multi million-euro divorce settlements were common during the boom years but these were now a thing of the past, according to David Bergin, principal with the Dublin solicitors, O'Connor & Bergin.
"Multi million-euro cases were much more common during the boom," said Mr Bergin. "Now there are virtually none."
The number of couples applying to the High Court – which traditionally hears more expensive cases – for a divorce has more than halved since the economic squeeze kicked in. In 2008, there were 43 applications to the High Court for a divorce; there were only 20 such applications last year.
"The vast majority of family law cases are dealt with in the Circuit Court," said Jennifer O'Brien, partner with the law firm, Mason Hayes & Curran. "However, if the assets are worth more than €3m or if there are complex legal issues, there's a tendency to issue proceedings in the High Court instead. These High Court (divorce) cases have definitely reduced in number – but there are still a number of cases being settled in the High Court."
The economic squeeze means that many couples can no longer afford the divorce settlements agreed during the boom.
This has prompted many to head back to court to reduce the size of any lump sum or maintenance payments agreed to.
"More applications are being made to the courts to review settlements agreed at the height of the boom," said Ms O'Brien.
The stalemate in the property market has prompted many divorcing couples to come to temporary arrangements because the money made from the sale of a family home – if it can be sold – would not be enough to secure an adequate settlement.
"In the Celtic Tiger years, the family home was usually sold for a good price and the proceeds divided between the couple," said Ms Walls. "That's now been replaced by very few house sales and even where a sale occurs, it is at a much lower price than before so it doesn't allow either spouse to buy another property.
"Another classic type of divorce settlement in the Celtic Tiger years was the buyout, where one spouse would borrow money to buy the other spouse out. That was possible when the banks were lending money for buyouts but that's not happening anymore."
Many divorcing couples are therefore forced to agree to three- to five-year arrangements where one spouse stays in the family home, while the other rents out a place. "This puts pressure on the couple's income as rent is to be paid and there is less to go around for everything else," said Ms Walls.
Mr Bergin said these temporary agreements were "not satisfactory" for divorcing couples as they offered no closure.