SDLTM09797 - SDLT - higher rates for additional dwellings: Condition C - divorce and civil partnership dissolution

Sometimes a divorcée or ex-civil partner is required by court order to retain an interest in a former home. Until 21 November 2017, such an interest normally counted when a purchaser was tested against Condition C. From 22 November 2017, such an interest will be ignored so long as it meets certain conditions.

On or after 22 November 2017, a ‘major interest’ in a property is ignored [Para 9B] for higher rates purposes where–

• the property is not a purchaser’s only or main residence,
• the property is another person’s only or main residence,
• the property is subject to a ‘property adjustment order’ in favour of that other person,

• The ‘property adjustment order’ condition is that the major interest in the ‘second property’ is the subject of a relevant court order. The relevant court orders are –

  (a) an order under section 24(1) (b) of the Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings),

  (b) an order under section 17(1) (a) (ii) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce) corresponding to such an order as is mentioned in paragraph (a),

  (c) an order under Article 26(1) (b) of the Matrimonial Causes (Northern Ireland) Order 1978 (property adjustment orders in connection with divorce proceedings etc.),

  (d) an order under Article 21(a) (ii) of the Matrimonial and Family Proceedings (Northern Ireland) Order 1989 (property adjustment orders after overseas divorce) corresponding to such an order as is mentioned in paragraph (c),

  (e) an order under paragraph 7(1) (b) of Schedule 5 or paragraph 7(1) (b) of Schedule 15 to the Civil Partnership Act 2004 (property adjustment orders in connection with dissolution etc. of civil partnership), or

  (f) an order under paragraph 9 of Schedule 7 or paragraph 9 of Schedule 17 to the Civil Partnership Act 2004 (property adjustment orders in connection with overseas dissolution etc. of civil partnership) corresponding to such an order as is mentioned in paragraph (e).

Where a divorcing couple settle their divorce by agreement, they will usually formalise that agreement and make it legally binding by applying to the Court for a Consent Order. Such an order will satisfy the Para 9B test where they cover matters that would otherwise have been the subject of a Property Adjustment Order.

This applies equally in the case of a civil partnership dissolution.

Example One

Rachael and Michaela have been in a civil partnership for seven years and have two children. They separate and wish to terminate the civil partnership. Through their lawyers, they negotiate a settlement and apply for a property adjustment order so that Rachael may remain in their home until the youngest child reaches the age of 18 or she enters into a new civil partnership or marriage. They apply for and obtain a property adjustment order under paragraph 7(1) (b) of Schedule 5 to the Civil Partnership Act 2004.

Michaela subsequently buys a new home to live in as her main residence. Although she maintains an interest in the former marital home, her interest in that property is ignored when considering whether she is liable to pay the higher rates on her purchase.

Example Two

James and Deborah who have been married for two years have separated and are in the process of getting divorced. They agree to settle amicably and for James to live in the marital home with their children until the youngest reaches the age of 18 or James remarries. They could obtain a property adjustment order under section 24(1)(b) of the Matrimonial Causes Act 1973 but decide to apply for a consent order instead.

Deborah then buys a new home to live in as her main residence. Although she maintains an interest in the former marital home, her interest in that property is ignored when considering whether she is liable to pay the higher rates on her purchase.