01 Mar Occupation of the matrimonial home after separation – should the party in occupation pay rent?
When the (former) matrimonial home is owned by one or both of the parties then one of two things must happen to it when a divorce takes place: either it will be transferred to (or kept by) one of the parties, or it will have to be sold -either immediately, or at some future date.
If it is transferred to, or kept by, one of the parties then it will have to be decided what, if any, share the other party has in the property, and what payment should be made to them in respect of that share.
If the property is sold then it will also be necessary to decide how the net proceeds of sale should be divided. But there is also another matter: who should occupy the property until it is sold?
If the sale is to be at some future date then that will normally be because the property is required as a home for one of the parties until that date. The most common scenario here is where one of the parties looks after the children, and needs the property as a home for the children, until they grow up. In such circumstances there will be a court order specifying that that party can remain in occupation of the property.
But what about an immediate sale? Who occupies the property until that happens? After all, no one can guarantee that a purchaser will quickly be found.
This was the scenario in the recent Court of Appeal case Derhalli v Derhalli. The case made headlines in the national newspapers, as the husband was seeking rent from the wife, who remained in occupation of the house until it was sold.
The background to the case was that Mr and Mrs Derhalli lived in a five-bedroomed house in Kensington, which was owned by Mr Derhalli. Their marriage broke down in 2014, and Mr Derhalli left the property.
Divorce proceedings were commenced and in 2016 the couple agreed a financial settlement. Under the terms of the settlement the property was to be sold immediately. Mrs Derhalli was to receive a lump sum of £5.8 million straight away, and a lump sum of £2.2 million when the property was sold, plus one half of the net proceeds of sale.
The settlement was set out in a consent court order. However, the order said nothing about the wife occupying the property until sale, or about her paying rent to the husband.
Problems arose because the sale did not take place immediately, due to difficulties with the post-Brexit property market. In fact, the sale did not take place until March 2019. Until then, Mrs Derhalli remained in occupation of the property.
In March 2017 Mr Derhalli served a notice on Mrs Derhalli requiring her either to vacate the property within four weeks, or alternatively to pay rent at the rate of £5,000 per week for her continued occupation. Mrs Derhalli refused, either to vacate, or to pay rent.
Mr Derhalli then took the matter to court, ultimately claiming a total of £600,000 rent from Mrs Derhalli.
A right to occupy?
The court initially decided that the consent order did not give Mrs Derhalli a right to occupy the property until it was sold, and that she should pay rent. However, she appealed against this decision, and the appeal court found in her favour.
Mr Derhalli then appealed himself, to the Court of Appeal. He argued that if he and Mrs Derhalli had known how long it would take to sell the property they would have agreed that she should pay rent, and therefore a rental clause should be implied into the consent order.
The Court of Appeal held that Mrs Derhalli had been entitled to remain in occupation of the property and that, as it had not been stated in the consent order, she was not required to pay rent – the order was final, and no rental clause could therefore be implied. Accordingly, Mr Derhalli’s appeal was dismissed.
As the Court of Appeal stated, the case makes clear the need to be specific as to the precise terms under which a party remains in occupation of a matrimonial home pending sale.