The following is a common scenario when a couple that jointly owns a property decides to divorce: one of the partners wishes to continue living at the property, while the other needs money for a new start and wishes to turn their share into cold hard cash as soon as humanly possible. Many people believe it’s impossible to find an amicable solution in this situation. This is where a compulsory public auction seems to offer both partners an opportunity to achieve their desired outcome. However, in the vast majority of cases, this opportunity proves illusory – with dire consequences!
A compulsory auction of the marital property is a special type of compulsory auction with the aim of dividing up shared property when its owners are unable to reach an agreement. When it comes to matrimonial property during a divorce, the problem in most instances is that the couple cannot agree on how much the partner wishing to stay in the property must pay the other partner. In this case, one of the partners – without the consent of the other – can apply for a compulsory auction at the local court. The execution of the auction is then in the hands of the court; the proceeds of the auction – minus the notary and procedural costs – are divided between the two owners.
Illusion #1: Acquiring the ex-partner’s share “on the cheap”
In theory, the partner wishing to continue living in the property now has an opportunity: they can make sure they are the one to submit the highest bid at the public auction, and thus acquire their ex-partner’s share. But anyone who pursues this strategy has been poorly advised. In many instances, other bidders – especially the ones who notice how keen you are to retain the property – will drive the price up to a point where you are in way over your head financially, even if yours does still end up being the winning bid.
Illusion #2: Quickly getting your hands on cash through a compulsory auction
For the partner wishing to move out and therefore interested in quickly monetising their share, a compulsory auction is also likely to prove a highly unsatisfactory solution. This is because once such an auction process is set in motion, you have absolutely no control any more over the selling price. The property might be auctioned off at a price far below its actual value – so far below, in fact, that you aren’t even able to repay any outstanding mortgage on it. Then there are the costs for an expert appraisal, the notary costs and the procedural costs. Instead of the hoped-for seed capital for a fresh start, a compulsory auction that doesn’t go your way can actually leave you in greater debt than before.
An amicable solution is always better
It is understandable that many people avoid a confrontation with their ex-partner regarding their shared property the way a vampire avoids garlic. Yet a compulsory auction is still the worst possible way out of this impasse. Both partners should bear in mind just how much it is in their mutual best interest to get the highest financial return from the property. To achieve this, there is simply no alternative to an amicable solution. No matter whether they mutually decide on selling, on one of the partners buying the other out, or on letting the property – any one of these options has many more rational arguments in favour of it than a compulsory auction. When seeking the optimal solution for a property – a solution that both partners can live with – a professional estate agent can provide you with expert advice and act as a neutral party to mediate between you both.
Are you unsure what the best solution is for your property during the divorce phase? Get in touch with us! We are happy to advise you.
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Disclaimer: This article does not constitute tax or legal advice in individual cases. Please consult a solicitor and/or accountant to clarify the circumstances of your specific case.
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