That dream vacation home in Spain has become a nightmare for divorcing couples
The pre-2008 real estate market is so far removed from reality now that the valuations appear as a strange dream. The only thing for an owner to do now is take a very long view and hope for a new bubble.
A second home in Tuscany or the south of France has long been the ultimate aspiration for many middle class families.
But for couples in the midst of divorce, tumbling property values in countries hit by the Euro crisis are rapidly turning former “dream” homes into a “toxic” legacy, lawyers have warned.
A string of cases currently in the pipeline centre around the question not of which partner gets to keep the villa in Spain, Greece or Italy but which of them has to take it on.
One lawyer described the task of dividing the assets between warring couples who own a holiday home as like “a game of pass the bomb”.
Case notes in one separation currently being negotiated include discussions about how to deal with a “dead duck” villa in Spain which has tumbled in value but still has a hefty mortgage to service and little prospect of being sold.
In another, a couple are wrangling over what to do with a house in Cyprus which is now worth minus £53,000 on paper after losses on the value, currency exchange issues and steep local taxes to transfer ownership are taken into account.
In other cases, the added complexity of disposing of a property abroad has become a weapon used by one side or the other in already acrimonious splits.
One British divorcee is being forced to go through a lengthy legal challenge in France to recover proceeds from the sale of their former home, awarded to her by an English court but being withheld by her ex-husband.
Louise Halford a partner in family law at Pannone solicitors, said that wrangles over overseas houses had become one of the biggest headaches in divorce cases in the last year.
The firm estimates that at least one in six of its cases involves the division of domestic and foreign property.
“It seems like a great idea owning a property abroad when you are a happy family but as soon as your relationship is rocky they are a disaster to be honest,” she said.
“I always encourage clients to get rid of it and let the other side have it because they are more trouble than they are worth.
“It is the thing that nobody wants in their divorce, it has become a millstone around the divorcing partner’s neck, they are toxic really for some people.
She added: “The majority of the people who’ve got these second homes in places like France and Spain, are not the super-rich they are just normal middle class families who have managed to purchase a holiday home.”
One case she has been dealing with involves a villa in Spain now worth £240,000 after losing about £100,000 in value and with £193,000 still to pay on the mortgage. Although the equity is worth £47,000 the couple fear they will never sell it.
Legal notes following a recent hearing state bluntly: “Solicitor explained that if we want the husband to keep Spain, which is a dead duck, we need to offer him a sweetener.”
Fiona Wood of Pannone added that some divorcees who received Continental homes before the financial crisis have attempted to “unpick” the terms of their settlements in light of the crisis but been rebuffed by the courts.
“The attitude is that if either a wife or husband has agreed to the terms of a settlement, they should be bound by the terms of that settlement regardless of what follows,” she said.
“Those most severely affected, in my experience, have been individuals who divorced before the start of the economic downturn.
“At that time, they might well have been justified in regarding foreign property as a worthwhile asset because prices were high.
“They feel aggrieved that the subsequent fall in values has effectively left them with a much smaller settlement at the end of what might have been a lengthy marriage.”