As we see more separated parents unable to fund two suitable homes following their divorce, bird nesting is emerging as a popular way for couples to share care of their children.
Bird nesting involves the children of the family remaining in one property (usually the family home) and the separated parents moving in and out to look after the children.
It can help children have more stability and routine in their lives, at what is often a very unsettling time, and means they do not have the upheaval of packing and moving between two homes.
It can also work financially. By maintaining the family home and finding a secondary, cheaper accommodation option, for example a small rental flat, it can help couples deal with the challenge of setting up two homes from the same financial resources that were funding just one.
But bird nesting is a complicated process with lots of moving parts, and there are issues that need to be considered, particularly the financial impact.
Ironing out the details of a bird nesting arrangement
Running a cheaper, more affordable second home can help reduce post-marital housing costs, with less rent/mortgage and cheaper bills, but there are various financial implications to consider, including:
- How will the property, and any additional property, be paid for?
- Who will meet the outgoings of both properties?
- How long should the property be used?
To ensure that the arrangements have a strong chance of working, it is important that these, and many other issues, are agreed from the beginning.
Something to consider: No ‘clean break’
One of the biggest considerations for couples looking at bird nesting is that it will mean they stay financially tied together for longer. Sharing a home and mortgage, along with potential financial commitments for the second accommodation, will prevent them from a financial ‘clean break’.
Continuing a financial relationship will impact how finances are settled, as part of the divorce process. If the couple wants to separate finances and have a consent order approved by the court, it is advisable that all bird nesting arrangements are agreed, as the details may impact the settlement.
For example, if the house equity at the end of the bird nesting is not to be split equally, should this be reflected in the financial contribution each couple makes?
Alternatively, issues can arise if the couple chooses to stall splitting their matrimonial finances whilst this arrangement is in place. For example, what happens if one parent starts earning significantly more or receives a large bonus? Or if one parent receives an unexpected inheritance?
Is this money taken into account when looking at who contributes to what, and what happens, when the time comes to settle finances? Is this included in the settlement when it was actually attained post-separation?
Keeping the house is an advantage in these current times
Bird nesting removes the immediate decision about what to do with the marital home. With rising interest rates and falling house prices, some experts are warning of an impending housing crash, so this may not be an ideal time to buy/sell.
Instead, keeping the family home will allow the couple to take their time, potentially riding out any future mortgage rate increases and price crashes. For those couples on an historic low fixed-rate mortgage, this could also potentially save them thousands, instead of having to move to a much higher current deal, now averaging at 6%.
Keeping the home can also help couples maintain it as an asset and build upon any available equity in the property.
Ending the arrangement
Couples also need to consider what happens when the bird nesting arrangement is no longer working or has reached its end. For example, what will happen to the house? How will any equity be split in the house? Will it be a 50/50 split or based on financial contributions over the years?
Putting in financial protection
A way for couples to put in some protection is to draft a bird nesting agreement. While not legally binding, it will create clear boundaries and ground rules that both people should adhere to during the arrangement and what happens afterwards.
The agreement can set how financial commitments will be shared, how long arrangements will be in place, the process if someone wants to end the agreement early, and what happens to assets and equity once the house is sold.
A lawyer should produce the agreement, with both parties receiving independent legal advice.
When bird nesting does not work
Bird nesting will not work for all relationships. It relies heavily on a healthy and amicable relationship between two parents. If it was an acrimonious relationship, or there are domestic abuse issues, bird nesting is not suitable at all.
As the cost-of-living crisis deepens and mortgage rates likely to rise, many couples are looking at different and creative ways to manage their finances post-separation.
Bird nesting is an option, but consideration must be paid to the financial issues it may cause, and legal advice is always advisable.
Joanna Newton is a partner at Stowe Family Law
