What to do about the rising cost of living and maintenance orders
UK Courts are likely to see an influx of applications from divorcees to vary maintenance orders as rising inflation and the costs of living crisis causes more people paying and receiving payments to reassess their current situation.
Many maintenance orders arising from financial remedy proceedings or otherwise agreed between the parties are linked to inflation, meaning that hundreds of payees may be faced with a higher bill, whereas those who are in receipt of maintenance and whose orders are not linked to inflation may be feeling the pinch from rising costs and may turn to the other party to top up their payments.
Here Helen Revill, a specialist family lawyer at Irwin Mitchell explains what this means for those affected.
What to do if your order is not enough and your cost of living is rising?
Firstly, check whether the order is index linked, or non-index linked. If your order is index linked, in theory this means that the payments you pay or receive should go up in accordance with inflation on a yearly basis. If your order is non index linked, the sum payable shall remain the same, regardless of the level of inflation. If your order is index linked it is important to check whether this part of the order has been followed.
Even in cases of index linked orders, this can easily go overlooked, and a calculation is likely to be required to ensure that the correct sum of maintenance is being paid.
On carrying out this exercise, you may discover you’ve been underpaid for months, or even years. In that scenario, the receiving party can request from the paying party the funds they have missed by the failure to increase payments each year. They can also ask that monthly payments be increased to fall into line with the relevant index.
What if my maintenance order is not linked to inflation?
If your order is not index linked, you may need to approach the paying party to request an increase in maintenance. In current circumstances where costs are rising for everyone, it is unlikely that the paying party will agree to a higher rate of maintenance without evidence of why this increase is needed, and even then this agreement may not be forthcoming.
If you are able to reach an agreement, it may be worth attempting to agree to vary the order so as to index link maintenance payments going forward to prevent a similar situation arising again.
How do I make sure any agreement is honoured?
If an increase in maintenance is agreed, this should be embodied within a variation order made by consent. This gives both parties a document to fall back on should the other breach the terms of the agreement. Without a variation order, there will be little recourse (save for making an application to vary) for the receiving party if the paying party ceases making payments of the additional sum.
What to do if you can’t afford your rising maintenance costs?
If, over the course of the maintenance order, you’ve consistently received a pay rise which is either in line with or less than inflation, and your recent pay rise falls below the current levels, you are likely to find yourself further out of pocket in the event that you are required to increase your monthly payments in accordance with inflation. In those circumstances, you may need to speak to the receiving party to attempt to reach agreement on the level their maintenance payments are to go up, if at all. In the interim, however, it’s always best to continue paying something, even if it’s less than the sum you usually pay.
If you intend to request a downward variation in the sum of maintenance payable to, it’s important that you have evidence of your inability to afford the current sum. Just as a paying party is unlikely to agree to an increase without supporting evidence, a receiving party is even less likely to agree a reduction without having evidence of an inability to pay.
Another option is to pay a one-off lump sum – known as capitalising your maintenance payments. This not only removes the monthly burden of paying maintenance, but can potentially reduce the total payable, on account of it being received in one lump sum.
Depending on the level of funds payable, this may also provide the receiving party with a fund to invest. This is, however, available in limited circumstances and is only likely to be of assistance where the paying party has capital funds available to them.
How can this be resolved amicably?
Discussions between the parties – If you feel comfortable doing so, the first step would be to reach out to the other party and have an open conversation about your respective changes in circumstances. You may be able to reach an amicable solution, which can then be incorporated into a variation order.
Mediation – If you don’t feel comfortable having a one on one conversation, either party could suggest mediation to attempt to reach a compromise. This is cheaper than instructing solicitors, and both parties are safe in the knowledge they’re being guided by an independent individual.
If both of the above fail and the parties feel they have no choice but to instruct solicitors, this doesn’t mean they cannot continue with a conciliatory and amicable approach. With advice and guidance, it’s possible for an agreement to be reached with the assistance and involvement of solicitors.
What can I do if we can’t reach an agreement on the level of maintenance?
If you are a receiving party, with an index linked order and the paying party is refusing to increase maintenance in line with inflation, you may need to make an application to enforce the order. In doing so, you’re asking the Court to force the paying party to comply. This isn’t a quick fix and can give rise to costs unaffordable for many. However, if you are able to meet the fees upfront, the costs associated with enforcement applications may be recoverable in the event of a successful application.
Alternatively, either party can make an application to vary the maintenance upwards (if you are the receiving party) or downwards (if you are the paying party). In doing so, it will be necessary for the party making the application to evidence either of 1) why they require an additional sum; or, 2) why they can no longer afford to pay the maintenance previously ordered.
In the current climate, it is difficult to know how a Judge may determine an application to vary/enforce where one party claims inability to make payments due to the increased cost of living (and not receiving a commensurate pay rise), and the other claims an increased sum for similar reasons. The likelihood, however, is that if a compromise is to be reached, this will necessitate each party having to bear a portion of the burden, and effectively meet in the middle.
Court is not the only option and there are various methods of Alternative Dispute Resolution which parties may seek to utilise, in order to resolve issues, or to reach an agreement.
