Value of assets
The effects of coronavirus are already being felt around the world. The impacts of coronavirus have been particularly relevant in relationship property settlements, particularly with the valuation of assets.
There has been a significant downturn in the stock market, which many people have left through the drop in value of their Kiwisaver and investment funds. The relationship property component of a Kiwisaver fund is from the start of the relationship to the separation date. However, the reality for most people, especially those with their Kiwisaver invested in a growth fund, is that their Kiwisaver are worth far less now than at the date of separation. This will pose some hurdles in determining the value of your shares and Kiwisaver in your relationship property settlement.
We haven’t seen a drop in residential property prices yet, but that could be a possibility with the ongoing economic impacts of the virus. It is important that you obtain up to date valuations before entering negotiations.
During times of economic uncertainty such as this, the banks tend to take a more conservative approach to lending. This will mean that if one party is to purchase the other parties’ interest in the property, they may be hard pressed to get finance for the purchase price.
The economic impacts of the coronavirus have had an impact on companies across all industries.
When markets change it might become particularly difficult to get a settlement with companies. The uncertainty makes it difficult to facilitate a sale of the company on the market, particularly when companies are gearing up to protect themselves from a potential recession.
Often when parties negotiate a relationship property settlement, the objective is to achieve a ‘clean break’. This is often achieved by one party purchasing the other parties’ interest or agreeing to a sale with the proceeds divided between the parties.
It is harder to have a clean break when there are trusts and companies involved. These business structures often involve third parties who have different interests.
For those that want certainty and a clean break, the only option may be to sell now and split the proceeds.
For those that are concerned about the reduction in value of their assets, an option might be to have a staged settlement. This would see that the parties agree on the division of assets and but process for dealing with the big assets that have dropped in value is recorded in the agreement. The agreement might not that given the economic downturn, certain properties, shares or companies will not be sold until 31 March 2020 or later by agreement.
The consequence of this is that there will be longer settlement periods.
Dispute Resolution Methods
Family law is one area of the law where client engagement is crucial. People are going through massive changes in their life and face to face contact is important to assess how the client is coping.
Face to face contact and meetings are also important in negotiating a resolution. We are likely to see a reduction in mediations and roundtable meetings. These can be effective ways of dispute resolution but with the emphasis on social distancing, we are likely to see an increase of lawyers trying to reach agreement by correspondence and holding mediations or court dates through conference calls and video.
It is difficult to get the same level of engagement or effectiveness in mediation by way of video conferencing apps like Skype or Zoom over the phone or the through email.
School holidays are usually quiet as clients are away but with a decrease in travel, these fluctuations may not exist for the next few months.
We are also likely to see a decrease in separations. People are less likely to separate when there is uncertainty the markets and potential job insecurity.