Sears Tooth Agreements: What Are They?

One of the biggest issues that weighs on people’s minds during divorce is how much the divorce is going to cost, particularly when it comes to dividing finances – and this is where Sears Tooth agreements come into play.

Sears Tooth agreements can provide those struggling with ongoing divorce costs with a solution. The agreements gained their name following a dispute between two law firms, one called Sears Tooth, the other called Payne Hicks Beach, over a client’s divorce funding arrangements after the client moved from one firm to the other.

Many couples, especially those who have been married for a significant length of time, or who have inherited together, have substantial assets like a property, but limited cash funds available. In cases where a divorce is straightforward, this isn’t necessarily an issue, as many firms, including ours, will offer fixed fees enabling you to budget for the cost of your divorce.

However, funding issues can arise if what appeared to be a straightforward divorce financial settlement descends into a heavily contested disagreement over who is entitled to what and legal costs fall outside of fixed models. Few, if any, firms offer fixed fees on contentious divorces as it can be extremely difficult to predict how and when an agreement – usually over money – is going to be reached. This is where Sears Tooth Agreements shine.

What is a Sears Tooth agreement?

A Sears Tooth agreement is a funding arrangement used during financial remedy proceedings in divorce. The financial remedy proceedings deal with how you and your partner’s finances are to be divided.

Under a Sears Tooth agreement, a client agrees to grant their solicitor security and certain rights over money or financial provisions, which enables the payment of legal fees to be deferred while legal representation continues.

Essentially, it allows you to defer payment of your legal fees until there is cash available to do so if you are unable to pay currently, for example when the matrimonial home is sold. The benefit of this for clients is that you are able to continue receiving legal advice even if you don’t have funds available at the time.

Once funds are available, your solicitor deducts their fee from the available funds, and transfers the remainder to you.

Sears Tooth agreements aren’t suitable for everyone, and it will usually be at the discretion of your solicitor to offer you such a funding arrangement. If you don’t have any assets or you own a home but your equity in the property is low, it’s unlikely that a Sears Tooth agreement will be offered.

Importantly, Sears Tooth agreements are not the same as ‘no win, no fee’ arrangements and legal fees remain payable regardless of the outcome of your case.

When are Sears Tooth agreements suitable?

There are several points that you and your solicitor must take into account when considering a Sears Tooth agreement:

1. you must be involved in financial remedy proceedings alongside, or after divorce (Sears Tooth agreements cannot be used for child proceedings or the divorce itself, in isolation)
2. whether you have sufficient funds available to meet ongoing and anticipated legal costs
3. the volume of assets you have and the accessibility of any liquidity in the assets
4. whether, as part of your financial settlement, you have a reasonable prospect of receiving a proportion of the assets which would cover all, or part of the legal fees you may incur
5. whether the legal costs you incur can reasonably be covered and are proportionate to the assets you own
6. who currently controls the family finances and financial dependency of both partners

What type of assets would be considered for a Sears Tooth agreement?

While some assets may be substantial (such as pensions), they may not always be considered for Sears Tooth agreements due to accessibility. Instead, the most common assets that would be used as security include those that can realistically be used to release cash, such as:

1. property sale proceeds, such as those from the family home or any other properties
2. business interest proceeds
3. cash lump sums that the court may order your partner to pay to you
4. shares or other investment assets

Remember that even if on paper your circumstances appear suitable for a Sears Tooth agreement, whether an agreement is ultimately offered will be down to the discretion of your legal services provider.

Do I have to accept a Sears Tooth agreement?

No, while it’s at your solicitor’s discretion to offer a Sears Tooth agreement, that doesn’t mean you have to accept any proposed agreement.

If you are provided with an agreement, your solicitor must advise you to take independent legal advice on it. This means you must seek advice from another solicitor on the terms of the agreement to ensure you understand what they mean and how they may affect you.

If you are unhappy with any terms, you may be able to negotiate them or, ultimately, find a way to without the agreement entirely.

Once you sign the Sears Tooth agreement, it is binding, even if your financial settlement does not go the way you had hoped, or you change legal representation. Remember too that although you may not be making payments toward your legal costs, they will still be incurred and your solicitor must provide you with cost updates.

Are there any alternatives to Sears Tooth agreements?

Yes – Sears Tooth agreements aren’t always suitable for the reasons set out above, or you may simply disagree with the terms of the agreement itself, or want more control over your legal costs.

If this is the case, there are alternatives available, including:

Litigation funding or litigation finance

Litigation funding is where a third party provides funding, typically through a loan in family law matters, that you can use to pay for your legal costs.

Usually, your solicitor will prepare the loan application with you and lodge it on your behalf. Once approved, your solicitor can request to draw down on the loan with your approval to pay for your legal costs.

Similarly to a Sears Tooth agreement, once you receive your divorce financial settlement, the loan provider will take their fee; however, they will also take any interest that has accrued. Interest rates vary and some lenders will also apply an administration fee on top of interest.

Unlike with Sears Tooth agreements, you may be required to pass credit checks in order to be eligible for litigation funding. If you appear eligible for a Sears Tooth agreement, but your solicitor is unwilling to provide you with one, many firms should instead be willing to accept litigation funding, provided you are approved.

Other third party lending

Some clients have means to fund their case from personal lending, such as from parents or close friends.

While less common, personal loans can come without interest and stringent repayment terms, however this will vary.

If the amount required is modest, some clients may also use credit cards or bank loans to pay for fees, although interest rates may be higher than from other funding sources.

Legal services payment orders (LSPO)

If you have exhausted every other avenue of funding, it may be possible to apply for a legal services payment order.

If approved, an LSPO will require your partner to provide you with funding, provided they have the means to do so, to pay for your legal representation. This could be through a one-off payment, through instalments, for a defined period, or as a deferred payment.

You must satisfy the court and show evidence that you have been unable to secure funding in any other way, and your partner must also demonstrate that they have the income to support an LSPO in order for it to be granted.

Are there any risks to Sears Tooth agreements?

As with any legal agreement there can be risks, some of which can be anticipated, others less so.

Generally, risks with Sears Tooth agreements include:

• Financial remedy proceedings resulting in a lower than expected settlement, for example where a partner has lied about assets, overrepresented, or hidden them
• The settlement being insufficient to cover legal fees, or legal fees absorbing the entire settlement
• The revelation of debts, costs orders, competing claims or other liabilities that reduce any settlement
• Any outstanding costs remaining payable, even if you decide to switch legal representation

It’s important that you understand the risks and duties when signing a Sears Tooth agreement, which is why it is important to take independent legal advice on the agreement prior to signing it.

How we can help

Divorce can be an extremely difficult period before factoring in housing, children and any other issues that might arise – including costs.

If you’re considering starting the process and you’re worried about how much your divorce may cost, our expert family law team are here to support you and advise with free consultations on all divorce matters.

If you anticipate funding may be an issue, or your partner is the family’s main earner, we can advise on any alternative funding options, including Sears Tooth agreements that may be suitable for your circumstances.

Simply call us on 0203 007 5500 or message us through our contact form here to receive a confidential call back.