An area where the benefit of a settlement agreement is often unappreciated, is the sale and distribution of the marital residence. It is not enough that the parties agree to sell their house. Just as parties often agree that they want a divorce, but then cannot agree on any of the terms by which their property will be split or their children raised, just an agreement to sell a house creates more questions than it answers. In agreeing to sell a house or, as often is the case, to sell it after a period of exclusive occupancy, the parties must consider numerous aspects of occupancy and sale of a house — i.e., who pays what bills for how long, what happens if they don’t, who occupies the house before and during the listing, who determines what to sell it for and under what terms, etc. The importance of properly drafting an agreement that anticipates and provides for all of these considerations varies, of course, with the importance of the issues. However, in the current seller’s market where house values have appreciated markedly in part because of the enhanced buying power provided by record-low interest rates, there is no question of the value of incorporating provisions into a settlement agreement that will control in the event of a downturn in the market before the house can be sold.
For example, it may be easy for the parties to agree to sell a house worth $250,000 five years ago, and now worth $400,000, three years from now when little Johnny graduates from high school. It might also be relatively easy for the husband to agree to let his wife remain in the house with his son for such a limited period where he has an expectation of getting half of the now-sizable equity once it is sold. However, if the house were to depreciate in the interim, serious problems will arise unless their settlement agreement considered and provided for this contingency properly.
Fortunately or unfortunately, the general rule is that once parties to a divorce action settle property issues the Court will not later modify the terms of their settlement agreement. There is no mechanism for the Court to reconstitute the parties’ agreement to make it fair in light of changed circumstances even if the parties did not consider those circumstances. For example, in DaLoia v. Burt, the Second Department of the Appellate Division of the New York Supreme Court recently applied this principle in a case where the plaintiff wife wished to compel the sale of the marital residence by court order. Their agreement had provided a set period of time in which the defendant husband could buy out his wife’s interest in the marital residence, and this option period had expired when the wife requested an order directing the sale of the house. The trial court denied her request, effectively granting an extension of the husband’s option. The Appellate Division reversed the trial court on appeal, holding that the lower court had no authority to modify the parties’ agreement.