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High Court Judge clarifies ‘3% Deduction’ where one party is buying the other party out

By June 7, 2024June 26th, 2024No Comments

In a recent decision of the High Court in late 2023, in a case of M v N, Judge Jackson made a
number of interesting observations in relation to a) the division of the sale of a family home,
b) the deductions to be taken into account in the case of a buy-out of the wife’s interest.

In this case, she directed that a ‘nesting’ arrangement, i.e. where the children would remain in
the family home and each of the parents would leave the family home when they are not
looking after the children, should pertain until the summer of 2026 which is when the eldest
of the two dependent children finished secondary education, at which point the house was to
be sold.

The Court considered that in normal circumstances, the wife would be given a greater share of
the sale proceeds because of her lower income but directed that the sale proceeds be split on a
50/50 basis, and took into account the following factors in making this decision.

A) She formed the view that the wife was a very capable person and had expressed a clear
intention to return to work. She had been out of work for some time because of
addiction related issues.
B) |The court took into account that during the nesting period, the husband was to pay the
mortgage and a significant amount of other costs
C) She took into account the fact that the wife was younger, i.e. was able to borrow over
a longer period of time.
D) She took into account that the fact that the wife was legally aided, i.e. had minimal
legal costs whereas the husband had significant legal costs.

She directed that the husband would have the right to buy out the wife’s interest in the
summer of 2026 based on an agreed valuation. She directed that in calculating what figures
were to be deducted from the agreed valuation that only the mortgage was to be deducted and
that the ‘3% sale costs’, which has been a traditional feature for many years in High Court
cases, should not be taken into account on the basis that in a buy-out, the 3 percent of sale
costs are not actually incurred by the seller, and indeed the person who is leaving has to incur
significant costs in funding a purchase for themselves and the stamp duty and legal costs that
are associated with such purchase.

This is an important clarification in relation to the ‘3% rule’ and provides judicial clarity on
this issue in circumstances where one party is buying out the other party.

For more advice or information on this or any other family law related matter, please do not
hesitate to contact Brendan Dillon, Emma Dillon or Aoife Cathcart on 012960666.

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