Real Estate in Divorce

In California, real estate owned as community property is subject to division upon divorce. This includes not only the marital home but also any other real estate: vacation homes, rental property, farms, ranches, business offices, and so on. These holdings often constitute the most valuable assets of a married couple; consequently, it is not surprising that questions often arise regarding how they should be divided in divorce. If you need legal advice regarding the disposition of real estate in divorce, the San Diego property division lawyers at Doppelt and Forney, APLC can assist you.

California is a community property state, which means that all of the assets acquired by either spouse during the marriage (except generally for property acquired by gift, by inheritance, or with separate funds) is deemed the property of both spouses, regardless of who earned all or most of the funds used to purchase the property.

An important issue to resolve from the outset regarding real estate in divorce, then, is whether a given asset is separate property or community property. This can become a thorny issue when it comes to real estate, since real estate is frequently encumbered by debt.

For example, suppose that one spouse purchases a house prior to marriage but takes out a mortgage and still owes money at the time of the marriage. Subsequently, community funds are used to pay the mortgage, make improvements, or pay property taxes while the marriage is intact. There may be reimbursements to the community if community funds were used to pay for a separate property residence. Also, there may have been a transmutation of the character from separate to community due to a refinancing and/or adding the other spouse’s name to the title.

For obvious reasons, this may not sit well with the original purchaser of the house. At the time that community funds were used, the purchaser probably did not anticipate any need to preserve the separate character of the house. In these cases, a court will decide whether all or only a portion of the house’s value should be deemed community property.

In order to be able to receive their portion of community assets, estranged couples may need to sell their community real estate and divide the proceeds. But this is not always a straightforward proposition, particularly if the market is down or limited. A property may sit on the market until after a divorce is finalized. Thus, if the parties take this route, they need to address several questions, including whether either party can use the property until it sells, who is responsible for maintenance, mortgage payments, property taxes, and insurance, and other issues.

Sometimes, one of the spouses will want to keep a community asset for their own use. This is often the case with a marital home, especially if the couple has young children whose lives would be further disrupted by needing to move. If it is feasible, sometimes one spouse can purchase the other spouse’s interest by qualifying for a mortgage loan independently or by agreeing to offset the purchase value by ceding other community assets. In this case, the spouses will need to agree on a purchase price and execute a buy-out agreement.

A couple may agree to continue to co-own a property. For example, if the couple own an apartment building as an investment, rather than sell it, they can change their relationship into a business relationship and own as tenants in common. An agreement spelling out the terms can thus become part of the divorce property settlement.

There are numerous ways to deal with real property division in divorce, but it is important to investigate which options are available and which pitfalls to avoid so that you receive the full value of the community property assets to which you are entitled.

A knowledgeable and experienced divorce attorney can help you craft a property settlement with your estranged spouse that achieves a just allocation of your community real estate holdings. If you need representation in a matter involving real estate in divorce, talk to one of the San Diego attorneys at Doppelt and Forney, APLC. To set up an appointment for a free in-person or virtual consultation, call 800.769.4748 or contact us online. We represent people throughout the San Diego metropolitan area, including in Chula Vista, Coronado, Del Mar, Carlsbad, Encinitas, La Jolla, Oceanside, Escondido, Ramona, Rancho Santa Fe, San Marcos, Valley Center, and Vista.