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Holiday entitlement, pay and furlough

COVID-19 has caused unprecedented challenges for employers for several reasons. You may have furloughed many of your staff members. However, there is still a need to navigate holiday pay and leave entitlement. In this article, we look at how holiday entitlement and pay apply during the Coronavirus pandemic.

This guide is for employers with furloughed employees, and those with employees who have continued to work during this period.

Coronavirus and holiday entitlement

Most UK workers can take up to 5.6 weeks’ paid holiday per year, which is the statutory minimum. Many employees are entitled to more holiday when expressed in their employment contract. Workers can take the same amount of holiday, regardless of whether they are on sick leave, maternity leave, parental leave, or any other type of statutory leave, including furlough leave. It is important to note that there is no requirement for workers to take holiday while they are on sick leave.

Furloughed workers and holiday entitlement

Workers continue to accrue holiday while they are on furlough and may take holiday without affecting their furlough. If you require an employee to take some of their holiday entitlement while on furlough, it is important to consider whether the employee can relax and enjoy leisure time (the purpose of a holiday). The need to self-isolate, socially distance, or if an employee is sick, may prevent them from resting. This is a fundamental part of taking holidays from work. You must also comply with the Working Time Regulations 1998 by providing twice as much notice of the requirement for the worker to take holiday, as against the period of holiday which you wish them to take. For example, if you require a worker to take five days’ holiday, you must provide ten days’ notice.

Are furloughed workers entitled to bank holidays?

If a bank holiday falls within a period of furlough, and the worker would typically have been working on that date, the bank holiday will not affect furlough. However, if the employee would normally have had annual leave on that date, you have two options:

  • the employee may take the bank holiday as annual leave; or
  • defer the bank holiday to a later date.

How much holiday pay are workers entitled to?

A worker’s entitlement to holiday pay will depend on the number of hours they work and how you pay them for those hours. Holiday pay entitlement for employees, regardless of whether they are on furlough or continue to work, can be calculated using the standard Government guidance or may be prescribed by what has been set out in the employment contract.

Note on furloughed workers and holiday pay

It is essential that employers correctly calculate furloughed workers’ holiday pay entitlement. Employers should not simply pay employees the rate of pay they are receiving while on furlough. The only exception is if an employer has agreed to pay the employee their usual rate of pay while they are on furlough. If any of your furloughed workers take annual leave during their period of furlough, you should calculate the correct amount of holiday pay using the standard guidance.

If the amount owed is at a rate higher than the pay they receive while on furlough, you must pay the difference. Taking holiday will not affect the furlough period. You can claim the usual grant from the government to cover the cost of holiday pay for the relevant period.

For those taking benefit from the flexible furlough scheme (in place since 1 July 2020) it is important to exercise caution as returning to work part-time may affect the rate of holiday pay to which the worker is entitled to. Holidays taken during flexible furlough should be paid in accordance with the Working Time Regulations. Only part of that payment will be recoverable under the scheme.

For further information, call Karen Cole today.

Note: This is not legal advice; it provides information of general interest about current legal issues.


COVID-19: Due diligence issues in corporate transactions

In this novel business landscape, it is essential for the buyer’s due diligence investigation to assess the impact that the pandemic has had (or may have) on the target and its business and what risk mitigation it has already undertaken before making any contractual commitment.

It is beyond question that the specific matters that may require enhanced COVID-related due diligence will vary greatly according to the circumstances of the transaction and the industry and geography in which the target operates. However, there are some common examples of areas of potential concern for buyers pursuing a corporate acquisition while the effects of the COVID-19 outbreak continue to be felt by businesses.

We set out some of the key issues buyers should consider when undertaking due diligence in the wake of COVID-19.

Contracts and trading

In many industries, COVID-19 could seriously threaten a target’s supply chain. Buyers should consider the target’s exposure to supply chain disruption and the extent to which this has affected or may affect, its ability to meet its own contractual obligations.

Buyers will need to evaluate the ability of the target and its counterparties to perform their respective contractual obligations. Buyers should investigate any potential events of default or re-negotiations of existing contracts and any material contracts, including a force majeure clause or other termination rights, which can be invoked because of the pandemic.

Buyers should also assess the target’s approach to business continuity planning and crisis management procedures. Buyers will need to examine the robustness and effectiveness of any such plans and procedures and consider whether any additional measures need to be implemented to mitigate the impact of the pandemic on the target’s operations.

Finance and tax

Rigorous financial due diligence will be crucial to evaluate the target’s long-term viability and whether it has the financial resilience to withstand the post-COVID landscape. Buyers should obtain financial information and management accounts reflecting recent trading activity (although these might not always be a reliable indicator of future profitability).

Buyers should assess the impact of COVID-19 on the target’s cash flow and the options it is exploring to address any issues, including whether it will likely require an injection of finance following completion.

Buyers should consider whether the target can benefit (or has already benefited) from one or more of the financial schemes and other support measures the UK government offers to support businesses during the COVID-19 pandemic, as set out in our recent article.

Buyers should also consider the application of EU rules on state aid when taking advantage of available government support; these rules still apply in the UK during the transition period following the UK’s exit from the EU.

Compliance and insurance

Buyers should consider the resultant change of law risk for the target and its business, including, in particular, whether the target’s operations comply with applicable COVID-19-related laws and whether they have had to adapt to take account of changes in the law stemming from the pandemic.

Buyers should review the target’s insurance portfolio, including any business interruption and key man insurance, to determine how much it is covered for losses arising from a business slowdown or stoppage due to the COVID-19 outbreak.

IT systems, cybersecurity and data protection

Buyers should evaluate the capacity and resilience of the target’s IT infrastructure to support remote working arrangements on a larger scale and maintain the integrity and efficacy of the target’s technology network.

Buyers should examine the measures the target has taken to secure its personal data, network and information systems and ensure these remain appropriate to the increased risk inherent in its new ways of working in response to the pandemic.

Buyers should also consider whether any capital expenditure is necessary to ensure the target’s IT systems are sufficiently robust.

Employment and immigration

Buyers will need to determine the proportion of staff that cannot work due to COVID-19 and how many employees are in receipt of statutory sick pay or company-enhanced sick pay.

Buyers should also request details of any furlough measures and the proposed length of furlough to assess the extent of any pay liabilities (as furlough varies contractual rates of pay).

For clear, detailed advice built around your target acquisition, call corporate lawyer Evangelos Kyveris today.

Note: This is not legal advice; it provides information of general interest about current legal issues.


Four steps to reduce the chances of a contested will (Part 2)

This month, we set out four steps to reduce the chances of your will being contested after you die.

Step 1: Prove your testamentary capacity

One of the grounds for challenging a will is to argue that the testator, the person who created the will, did not have mental capacity at the time. There is a presumption that the testator has the capacity, and it is for the challenger to rebut that presumption. However, you could prove your mental capacity to counter an anticipated challenge.

If you instruct a professional or a qualified solicitor, they will usually make notes on your mental capacity when making your will. However, you may need more evidence in some circumstances than a solicitor’s attendance note. If you are older or infirm, it may be necessary to either:

  1. have your will witnessed by a medical practitioner who understands the notion of capacity and can make a record to show that they have undertaken an assessment of your capacity to sign a will; or
  2. have an individual assessment by a specialist mental capacity assessor.

You will have to pay a relatively modest sum if you want to select either of these options, but it can help you ensure that your estate avoids incurring tens of thousands of pounds in lawyers’ fees in the event of a dispute after your death.

Step 2: A “no contest” clause or a forfeiture clause

If you plan to leave someone a gift in your will rather than cut them out entirely, you may wish to consider a “no contest” clause. This clause states that you are making a gift to somebody for a certain amount, and if they challenge your will for a bigger share, they will forfeit their entitlement to the initial gift. While this does not entirely prevent challengers, who may think it is worth losing £10,000 to get £80,000, it may prevent others from taking the risk of losing that money.

Step 3: A declaration/letter of wishes

If you do not plan to leave a close family member a gift, you can make an explicit declaration to this effect in your will.

The declaration will state that you have considered their position and have decided not to make any provision for that person in your will and make a brief statement about why not.

As this will be stated on the face of your will, it shows that you have given the matter some consideration and have made an informed decision. Best advice dictates that you set out more detailed reasons and background in a separate statement called a letter of wishes. This will not form part of the will but would be admissible as evidence should a claim emerge.

We often recommend letters of wishes as they allow you to set out the background and history of why you do not feel this person is entitled to any or any more of your assets. It could be because you have made numerous lifetime gifts to them or simply because you do not like them. Whatever it is, put it all down in a letter of wishes to show that you have given the matter thought. It will help you to explain your reasoning. Unlike your will, which becomes a public document once admitted to probate, your letter of wishes remains private. However, if there is a dispute, your letter of wishes will be used as evidence in court, and people other than your executor will read this.

Step 4: Don’t let your assets form any part of your estate when you die

One of the best ways to ensure no dispute arises over your assets is to dispose of the bulk of your estate during your lifetime. There are several ways you can do this. For example:

  • you can transfer assets out of your name to your intended beneficiary during your lifetime;
  • you can make gifts of cash during your lifetime; and
  • you can place assets in trust during your lifetime.

While this sounds simple, any action to transfer an asset outside your estate may still have tax consequences, and you should take legal advice. You must seek appropriate advice before trying to do this.

If you need advice on any of the points raised in this article or our previous article, please feel free to contact Private Client Solicitor James McMullan, who will be happy to help.

Note: This is not legal advice; it provides information of general interest about current legal issues.


Non-Compete. Get it right to protect against competition

When an employee leaves, and there is a threat of commercially sensitive information about operations and customers being passed to a competitor, the non-compete/restrictive covenants in the employment contract are effectively the safety net in protecting know-how and business relationships.

A recent case heard in the High Court has shown that while the court will enforce non-compete clauses, restrictions must go no further than protecting legitimate business interests. It also highlighted the importance of being clear about any so-called ‘garden leave’ where employees work out their notice period at home.

In Square Global Limited v. Leonard, a broker was required to give six months’ written notice. The employment contract also contained a restriction on him working for a competitor for six months after the end of his employment. When he immediately handed in his notice and left to work for a competitor, his former employer relied on the employment contract. In response, the broker claimed he had been constructively dismissed, arguing that this released him from his obligation to give notice and the non-compete clause.

The High Court upheld the employer’s argument. It said that the six-month non-compete clause was reasonable and went no further than necessary to protect the employer’s legitimate business interests. It was, therefore, enforceable. The court also decided that the broker was required to serve out his six-month notice period on top of the six-month restriction, keeping him out of the market for a total of 12 months.

This compares with a case in 2014, Ashcourt Rowan Financial Planning Limited v Hall, where the High Court held that a restrictive covenant designed to prevent a former employee from working for a competitor for six months was unenforceable because the covenant was too widely drawn, going beyond protecting the legitimate business interests of the employer to be in restraint of trade. The High Court found that the covenant was not confined to what was reasonably necessary and covered indirect involvement without any obvious justification.

The law has always regarded a covenant ‘in restraint of trade’ as being void because an individual should be free to follow his trade and use his skills without undue interference. Such clauses are, therefore, only enforceable if they are strictly limited to what is necessary to protect a business.

Employment partner Karen Cole said:

“This is a reminder that employers need to ensure that non-compete clauses and other restrictive covenants are reasonable and focus on activities which would involve the employee directly competing with their old employer. Trying to do a catch-all is impossible to enforce.

Garden leave and how or when that might be offset should also be tackled. What’s important is that any restrictions are carefully drafted and checked at the outset.”

Contact employment partner Karen Cole today if you have an employment law query.

Note: This is not legal advice; it provides information of general interest about current legal issues.


How TUPE protects when employees transfer

TUPE (The Transfer of Undertakings (Protection of Employment) Regulations 2006) is designed to protect jobs and safeguard contractual terms for employees when a business transfers to new ownership or a contract is placed with a new service provider. While it has been clear that the new employer must not change terms to disadvantage an employee, the Employment Tribunal has ruled that changes made solely for the transfer should not benefit an employee either.

The case involved Lancer Property Asset Management, which provided estate management services to Berkeley Square Estate, who decided to move to a new service provider. As a result, the directors of Lancer were to become employees of the new provider, Astrea Asset Management Ltd, under the TUPE regulations.

In preparing for the transfer, the directors decided to award themselves a salary increase and generous new terms for bonus and termination payments, together with a 24-month notice period. The new employer disputed the terms, sacking two of the directors for gross misconduct and refusing to pay the enhanced benefits to the other directors. The resulting dispute ended up at the Employment Appeal Tribunal (EAT), with the directors arguing that the TUPE regulation regarding pre-transfer variations was for situations where the change was detrimental to the employee.

Employment partner Karen Cole explains:

“TUPE is about ensuring fairness and continuity, so it’s no surprise that anything that makes an employee worse off would not be allowed but being better off hasn’t been tested in this way before.

The EAT said that all contract variations which are connected to a transfer are void, whether they are detrimental to the employee, and the objective of TUPE is to protect, not enhance. The EAT also highlighted that no legitimate commercial purpose could be demonstrated for the changes, meaning they infringed the general abuse principle of EU law and were unenforceable.

Contact Karen Cole today for further advice and information on TUPE, whether you’re an employer or an employee.

Note: This is not legal advice; it provides information of general interest about current legal issues.


How to reduce the chances of a will being contested (Part 1)

Making a will doesn’t guarantee people won’t argue over your assets. Still, it can reduce the chances of your will being contested if it is made correctly and supported by a professional will drafter or, even better, a qualified solicitor.

There are several grounds upon which somebody can challenge a will. The main ones are:

  1. A lack of testamentary capacity
    The person creating the will did not have the mental capacity to create the will.
  2. Lack of due execution
    Either the will or the signatures on the will do not meet the necessary formalities of creating a will.
  3. Undue influence or coercion
    Somebody, typically one of the beneficiaries, had pressurised the writer of the will to create it in the way they have.
  4. Lack of knowledge and approval
    The person creating the will did not know the contents of the will or fully understand what they were signing, and perhaps even signed the document without even knowing they were signing their will.
  5. Fraud or forgery
    A third party could have fraudulently made all or some of the will.
  6. Reasonable financial provision
    Although not a challenge to the validity of a will itself, certain persons can make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 on the basis that the will (or if no will, the Intestacy Rules) does not leave the applicant with “reasonable financial provision”.

Probate disputes are expensive to resolve and stressful. But in recent years, we have seen more and more of them; potentially because of the increasing value of people’s estates (especially considering property prices), A complainant may think it’s worth taking the punt that it’s worth spending £10,000 to contest a will if they could potentially gain £80,000. Before making that decision, however, they should bear in mind that the executors’ costs in defending such a claim are taken from the estate.

There are many benefits to having your will drafted by a qualified solicitor. Each time you meet your solicitor to discuss your will, they will usually record a file note of your instructions and record other factors such as why you wish to distribute your estate in a certain manner, why you chose to exclude certain beneficiaries and, if relevant, notes on your mental capacity at the time of making your will. Should the will be contested, your executors can obtain copies of these notes from the solicitor as evidence of your thoughts, feelings, wishes and beliefs when creating your will. This could prove that any grounds to contest your will are flawed.

Under ‘normal’ circumstances, the will is usually executed under the supervision of the solicitor or will drafter who drafted it, and it is normal practice for at least one of the witnesses of the will to be that solicitor or will drafter. Solicitors, in particular, will ensure that your will complies with the formalities set out in the Wills Act 1837.

Further, if a solicitor drafted the will, the original can usually be stored by the firm in a strong room. This limits any chances of forgery taking place following the testator’s signature to the will. The will is then only released to the person who created it or the executors of the will upon producing a death certificate.

The global pandemic has led to an increase in the number of people creating new wills. Many of these have been DIY wills, which may be satisfactory on most levels but may not put the relevant safeguards in place, as a solicitor would, to prevent your will from being contested.

All our wills are drafted and documented by fully qualified solicitors with expertise in inheritance tax planning. We have onsite storage facilities to store your will until it is needed safely.

If you have any other query regarding your will or estate, please feel free to contact private client solicitor James McMullan who will be happy to help.

Note: This is not legal advice; it provides information of general interest about current legal issues.


Locking down the legalities when planning ahead

The Law Society says that many firms have reported a 30% increase due to worries about the Coronavirus pandemic. However, the lockdown and self-isolation create new challenges in getting new wills drafted and signed while complying with legal requirements.

There has also been a surge in people looking to set up powers of attorney to enable others to act on their behalf in managing their financial, property and other affairs should they lose capacity. However, this is also proving a challenge during the current crisis.

Private client partner, James McMullan, says:

“It’s important to get it right when dealing with vital documents involving your assets. There are issues around demonstrating that someone has the ability to make such decisions if they are older or unwell, as it is likely to be difficult to get a doctor to verify their capacity with the current pressure on the NHS, which may be needed if new wills or powers of attorney are to stand up in court.

In such situations, the ideal is to sit down with the person face to face to get a sense of how they articulate their choices and to be sure the outcomes are what they really want, whether deciding who will inherit through their will, or appointing attorneys to manage their affairs.”

In today’s climate, such discussions are more likely to be by telephone, email or possibly video conferencing, particularly where someone is ill. Still, if an independent professional is involved, there is a greater chance that new wills and powers of attorney will later stand. They will check if you are leaving yourself open to claims on your estate by excluding anyone and advise on the appointment of attorneys to be sure they are fit for the task and understand their responsibilities and how they will be held accountable.

A professional can also help to ensure that new wills and powers of attorney are legally binding, as the actual signing and witnessing of a will remains an exception to the recent shift towards accepting electronic signatures on contracts and many deeds in England and Wales.

While live video witnessing in such situations is under discussion, the current rule is that anyone making a new will must sign in the presence of two witnesses, who must, in turn, sign in the presence of the person making the will. Physical presence is essential but presents a real challenge given the present regulations requiring social distancing, particularly as anyone who is a beneficiary will lose their gift under a will if they witness it. It means that immediate family members, who are most likely to be available, cannot be a witness if they stand to inherit anything.

Even witnessing from the next room or through a window might be challenged as not being formally in the presence of the person making the will, although in a case that went to court almost 250 years ago, it was agreed to be sufficient to have two witnesses who are in the line of sight even though they were not in the same room (Casson v Dade 1781)

Why make a will?

Research shows that half of all adults in the UK do not have a will in place, with the figure rising to almost 60% among parents.

Many avoid making a will because they imagine their assets will go automatically to their partner or their family will be left to decide how to distribute it. But without a will, the intestacy rules come into play, which govern how a person’s estate is distributed if they die ‘intestate’.

The rules have a strict order of distribution and do not provide for any cohabiting partner, irrespective of the length of the relationship. They also allow children under 18 to receive assets without controlling how the money is spent.

Having a will setting out what you wish to happen if you die before your children are 18 is the only legal way to be sure they will be provided for and brought up in the way you wish, with the guardians you choose.

If you drew up your will before getting married, it is automatically invalidated on marriage unless it was drafted in expectation of the ceremony. And if you are getting divorced, any existing will remains valid until the decree absolute is confirmed, even if you have separated or received your decree nisi, meaning the spouse you are divorcing would benefit if those are the terms of your existing will.

Equally, if you do not have a will and something were to happen to you before the divorce is completed, then the intestacy rules would apply and, again, it would be the spouse you are divorcing who would benefit, not your children or a new partner, parents or siblings. This may be the outcome you wish to happen, but if not, the only way to ensure that your wishes are carried out is to make a new will to cover your current situation, and this can be done at any stage of the separation and divorce process.

Call private client partner James McMullan today.

Note: This is not legal advice; it provides information of general interest about current legal issues.


NDAs: Making yours watertight?

NDAs have been put firmly in the spotlight after the Weinstein saga and the accusations against Sir Philip Green and Donald Trump. The suggestion is that the technique was used to ‘hush up’ certain allegations.

With so much media and parliamentary scrutiny, the use and enforceability of NDAs have inevitably been brought into sharp focus.

What is an NDA?

While the use of NDAs in today’s business world doesn’t generally tend to be as sinister, the best way to keep legitimate business information confidential is not to disclose it in the first place. However, if you need to share confidential information, putting an NDA in place can be helpful.

An NDA is a legally binding contract under which the parties agree to share private and/or confidential information and not to disclose that information for a defined period.

It is an important legal tool businesses use to protect business secrets and regulate and record the flow of confidential information, which can be one way or mutual. NDAs, therefore, come in all shapes and sizes.

However, at their core, they have one clear objective: to identify confidential information and establish how and in what context that information can and cannot be used by reference to a specific permitted purpose.

When are NDAs unenforceable?

The recent scandals and attendant public debate serve as a reminder that NDAs may not always be enforceable – even in circumstances when all contractual elements are present to create legal obligations. Sometimes, a court refuses to enforce a non-disclosure agreement that otherwise seems legally binding.

Seven recommendations for ensuring your NDA is enforceable

  1. Name the correct parties: Identify and contract with the correct legal entity by listing both its legal and trading name, as well as its registered office address and company number.
  2. Ensure binding authority: Check that the document is signed by an appropriate director or officer of the counterparty who has the authority to sign on its behalf.
  3. Establish what information is protected: Clearly define ‘confidential information’ and limit confidentiality to information that must be kept a secret. Although it may be tempting, avoid using a catch-all clause.
  4. Consider the duration: Think about how long the confidentiality should last for. Between three and five years is common.
  5. Take restraint of trade into account: Ensure that any non-compete clause or restrictive covenant protects some valid and legitimate interest linked to the NDA. Otherwise, it may be deemed an unreasonable restraint of trade.
  6. Check for permitted disclosures: Expressly recognise that the NDA does not prohibit certain disclosures such as information:
    • provided by a third party already known before the NDA or in the public domain developed
    independently relating
    • to professional misconduct – such as sexual harassment towards employees or clients protected by law reportable to regulators and/or law enforcement agencies connected to ongoing criminal investigations and prosecutions
  7. Take legal advice: Ensure that all parties have obtained independent legal advice before signing the NDA, and include a statement to this effect to avoid the suggestion that any party took unfair advantage.

Even when an NDA is enforceable, it must prove that the counterparty breached its terms by making the information public – which can be difficult.

For further advice and information on NDAs, call Evangelos Kyveris today.

Note: This is not legal advice; it provides information of general interest about current legal issues.


Lockdown family breakdown toolkit

For couples who are struggling in their relationship or as co-parents, anxiety levels are likely to be heightened during lockdown. Meanwhile, it seems there is nowhere to turn, with personal movements restricted and the family courts working remotely and on limited schedules.

Being a family lawyer means being there for all the challenges, not just the day in court. It is more important than ever that family lawyers are available to advise, encourage and support their clients. At RIAA Barker Gillette, we use the latest technology to host face-to-face meetings with our clients, keep the doors open, and support families through this crisis.

In China, which was first into lockdown following the discovery of the virus, there have been reports of a huge surge in divorce petitions as couples emerge from the country’s stringent restrictions, with one city official in Hunan province quoted as saying that what may have seemed trivial in normal life had escalated for many couples struggling to deal with these exceptional circumstances.

For those in the UK who were considering or had already started divorce proceedings, many will still be living together, adding to the pressures of lockdown. For those struggling under the relentless strain of being in each other’s company 24/7, it will be hard to find a way to release the pressure to see clearly whether the relationship has run its course, such as through couples counselling or simply taking a break from each other.

While no-fault divorce is likely to become law once the legislation resumes its progress through Parliament, for now, couples must continue to deal with one party being ‘blamed’ for the breakup or wait for the change in the law.

Under the existing Matrimonial Causes Act 1973, one party must prove that their partner is at fault through either adultery or unreasonable behaviour. Alternatively, and only if both sides agree, they can part after two years of separation. If no fault is given, and one party does not consent to the divorce, then the period of separation is extended to living apart for five years.

For those who feel compelled to act now or as soon as we come out of lockdown, it is likely that we will see unreasonable behaviour cited as the most common ground for such divorces. The most recent ONS statistics (for opposite-sex couples) show 36.8% of all husbands and 51.9% of all wives petitioning for divorce on this ground.

But petitioning is only the start of what may be a long journey, with the process of divorce, negotiating over finances and family arrangements, becoming ever more complex. That is partly because there is more at stake, particularly for middle-aged couples when couples hammer out a fair division after a marriage breakdown. ONS wealth statistics show that by 2014, half of all households had a total wealth of £225,100 or more.

The Children and Families Act 2014 requires a couple who are separating to consider using mediation or other alternative dispute resolution options before they can ask a court to resolve their dispute, so it’s best to approach things with an open attitude. We always encourage couples, where safe, to talk and to try and come to an agreement. This has become even more important in the current situation.

Toolkit: Things to think about, depending on where you are

Deciding whether your relationship has run its course

If you’re going through a bad patch, you may have decided to try and reconcile your differences or else wait until the lockdown ends. Assuming there are no personal safety issues, the decision will likely be dictated by financial circumstances. Funding two homes is daunting when job security is under threat and investments have crashed, and that’s before considering how to identify and move into alternative accommodation under lockdown.

If the result is that you are going to try and live apart while still in the same house, in anticipation of separation later, it’s worth approaching it in a structured way and tackling the bigger issues, such as agreeing on who gets which rooms or areas, how you will share the household expenses and how you will present the situation to any children living with you.

It is a good idea to put such arrangements in writing. You can do this yourself or with the help of a mediator or one of our family lawyers. Involving them early can help avoid the obvious pitfalls while giving you some moral support. Such assistance becomes vital when deciding to start divorce proceedings when legal and financial advice is important from the very beginning.

Regarding administration, the courts have confirmed that online applications will continue, with the divorce petition processed from application through to decree absolute without any need for face-to-face contact.

Similarly, applications for orders relating to children can be made urgently or online (in certain postcodes).

Progressing divorce

The current financial uncertainty is making decision-making difficult. Any financial arrangements made in usual circumstances will have a degree of flex built in, but we are in extraordinary times where both assets and job security will be uncertain.

The starting point for any settlement is to look at assets in the marriage, with shared financial information for bank accounts, investments and other assets. For those who are part of the way through the process, such figures may have been collected some time ago and already form the basis for a settlement figure. The impact of the Coronavirus on all aspects of the economy, the stock market and the likely downturn in the property market make it essential that these are reviewed in the context of any settlement negotiations.

If a court date has already been set, the hearing may be moved and will be held remotely. Where cases are complex, the courts are expected to use video links for hearings, although in-person hearings may still be held subject to individual circumstances and the demands of the case.

It is usual in any divorce settlement to balance risk with absolute value, and we work to ensure no individual ends up with all the riskier or illiquid assets. Still, some may have already reached a settlement that no longer seems fair. It is important to seek legal advice and guidance as soon as possible, as the speed of action is one of the factors considered by the courts. There is no guarantee that orders may be amended, even in the current circumstances. The capital elements of any settlement will be amended only where an unforeseen event invalidates the assumption on which the order was based, and following the 2008 market crash, the Court of Appeal ruled the financial disruption was not an unforeseen event.

Maintenance arrangements

Unlike the capital element, if you earn less money during the crisis or have lost your job, it may be possible to ask the court for a payment variation under a maintenance order. Going back to court can be costly; the best starting point would be to see if you can reach an agreement yourself while exploring other sources of income and benefits.

It’s worth appreciating that a fall in income may not justify a change in arrangements, as maintenance is needs-based, and the needs of both parties and any dependent children will be evaluated.

Suppose you are the one receiving maintenance payments, and you lose other sources of income during the current crisis, such as your job. In that case, you can ask for a variation due to changed circumstances. Still, the court will first expect you to take reasonable steps to secure other sources of income, such as applying for relevant Government Coronavirus schemes. If it’s likely to be just a temporary situation, then try to have a conversation and put everything in writing.

Whether you are paying or receiving, take legal advice and avoid getting into a situation where you breach a court order without trying to resolve the problem.

Co-parenting

Where parents live in different households, the Government has clarified the advice on how to approach co-parenting.

Children under 18 whose parents are living apart can move between the homes of their parents, in an exception to the mandatory stay-at-home rule for us all. But this does not mean children should move around without weighing up what is best – such as the health of all concerned, the risk of infection and how and where any handover occurs. If one parent is a key worker, then it may be sensible for the other parent to look after the children to reduce infection risks.

If, for any reason, a child will not spend their scheduled time with one parent, the courts expect regular contact to be maintained through other means, such as FaceTime or Skype.

Importantly, any variation to current arrangements should be agreed between you and put in writing wherever possible. The guidance says that:

“…the court is likely to look to see whether each parent acted reasonably and sensibly in the light of the official advice and the stay-at-home rules in place at that time, together with any specific evidence relating to the child or family.”

Where there is a disagreement on arrangements, seek legal advice. Whether for enforcement or applying for a change to the contact arrangements, court hearings continue, although the default is via phone or video link.

The most important thing for children is that parents avoid conflict. Movie stars Bruce Willis and Demi Moore may have divorced 20 years ago, but they are exemplary co-parents – even sharing lockdown time together with their adult children in California.

In her recent autobiography, Moore wrote that it wasn’t easy at first, “but we managed to move the heart of our relationship, the heart of what created our family, into something new that gave the girls a loving, supportive environment with both parents. We felt more connected than we did before the divorce.”

That’s a great position to be in. Still, for those who struggle to emulate such an example while going through a relationship breakdown, it’s important that you do all you can to avoid heated disputes and keep arguments away from any children.

For more information, read our article “Co-parenting during COVID-19”.

Domestic abuse

China experienced a surge in reported domestic abuse during the lockdown, a factor, unfortunately, being replicated in the UK according to early reports, so while it may be a hard call to make, in the current situation, it’s more important than ever that you seek legal advice and/or contact the police if abuse is taking place.

For those without physical risk, acting if you need help is still important. Reaching out to a family lawyer and receiving impartial support may be enough to keep things on a more even keel during a lockdown.

If things have gone too far to be resolved, then receiving legal advice on what is feasible and how to approach conflict could make all the difference. If you are in lockdown with your partner, you may not be able to speak on the phone or video conference, but having an email exchange with a lawyer can bridge the gap. Our family lawyers are making themselves available in whatever way they can to help with the current crisis.

Contact family solicitor Pippa Marshall today for more information.

Note: This is not legal advice; it provides information of general interest about current legal issues.


Suspension of rent because of a lockdown

The most common question has been, “Do I have to carry on paying my rent?” or conversely “Must my tenant still pay the rent?” Typically, the answer is yes. The rent is still payable, as nobody in the real estate world foresaw the lockdown.

Such has been its severity that lawyers will be expected to address the possibility of repetition in future lease negotiations.

For many years it has been customary in leases to stipulate that rent will be suspended and not payable if the property is damaged by fire or another insured risk. Note that a precursor to the usual relief application is physical damage or destruction of the bricks and mortar, and the virus has not caused such damage.

Tenants will likely try to negotiate the inclusion of wording which extends the suspension of rent to the period of any lockdown resulting from a future pandemic or similar event. Landlords may or may not resist successfully. The leap in mindset has already been done in respect of what lawyers commonly call ‘uninsured risks’, but this has been relatively easy to concede because of the rarity of its application. Fears regarding the virus have spilt over into fear of a second pandemic once the current one is over. It is likely to be regarded as a clear and present risk.

Landlords may look to offset the risk against insurance cover, as they do with a loss of rent insurance in case of damage by fire (mostly paid for by tenants).

Doubtless, insurers are already reflecting on new products and extensions to business interruption policies due to the pandemic. Press stories on the reliability of claims on such policies for the current virus leave one with the impression that the endeavours of the insurance industry may continue to exploit the fine line which sells policies but does not necessarily pay out on them.

Insurers have to make profits, and the hard truth may be that the effect of the pandemic is so huge that its widest effects are uninsurable. It falls to the government to be an insurer of last resort (a role that it undertook as a reaction and not by design regarding COVID-19). It may not be beyond the limits of the insurance industry to develop a loss of rent policy for the real estate world, which complements a clause for suspension of rent in case of a pandemic lockdown. Time will tell.

What will become normal practice, in respect of the sharing or bearing of risk between landlord and tenants for rent payment for properties that are not useable because of the pandemic lockdown, is uncertain. It will surely be the subject of active discussion in future lease negotiations.

Call John Gillette today if you have a question about the terms of your lease of commercial premises or any future lease.

Note: This is not legal advice; it provides information of general interest about current legal issues.


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