Real Estate Divisions in Divorce

Dividing real estate and other pieces of property can be a major issue in a divorce. Real estate may include land, houses, rental properties, business locations, and other buildings owned by the spouses jointly or separately.

Personal property may be simpler to distribute in a divorce, but real property can be more difficult if it cannot be physically divided or sold off to divide the proceeds. When a divorce involves the family home, there is also likely sentimental attachment to the property that does not have a set dollar value.

Divorce and Property Distribution

In divorce proceedings, if you and your spouse can agree on how to divide the property and assets you can have a distribution plan approved by the court. If you cannot agree, then the divorce is considered “contested,” and the family judge will decide how the property should be divided.

Different states follow different property distribution laws. In community property states, property acquired during the marriage is treated as marital property. Upon divorce, the property is equally divided, no matter who earned the assets or debts. However, property acquired before the marriage or through gifts or inheritance may still be considered the separate property of one spouse.

In equitable distribution states, property acquired during the marriage belongs to the spouse who earned the property. In a divorce, the court will equitably divide the property, based on a number of factors.

Whether in a community property state or equitable distribution state, if you have a prenuptial agreement, the agreement may control what happens to the property.

Who Gets the House in a Divorce?

A residential home is the largest asset for many people. The value in your home may amount to hundreds of thousands of dollars, and determining what happens to that valuable real estate can be a point of contention. A home will not be physically split in half, so the court prefers to either sell the property or award 100% of the residence to one spouse.

In a community property state like California, if the couple bought the house out of marital funds, the house belongs equally to both spouses. If the spouses cannot agree on who gets to live in the house, a court could require one spouse to buy out the other’s interest in the property, or force a sale and divide the proceeds. If one spouse is buying out the other, the property’s current fair market value will likely determine the cost of the buy-out.

When the property does not have a lot of equity or each spouse individually cannot afford to make payments on the house or pay for upkeep and maintenance, it may be better to sell the house and divide any proceeds that remain.

In an equitable distribution state like New York, the court may look at several factors in deciding who gets the family home and how to divide other property to offset the home as a major asset. Factors to consider in equitable distribution of the home may include:

• If there are minor children living there
• Which parent the children will primarily live with
• The children’s best interests
• The age of the spouses
• The economic circumstances and earning potential of each spouse

Can the Court Force Me to Sell My Home?

Another reason why it may be better to negotiate the division of property with your spouse instead of letting the court decide is that the divorce judge can force you to sell your home. As part of the divorce, the court can force the sale of the home to divide the financial assets.

Even if neither you nor your ex wants to sell the home and you both want to keep the home, the court can require the sale to change the property into easily dividable financial assets. If you want to remain in your home, this is an issue that you should discuss with your divorce attorney.

Dividing Up Investment Property

Many couples have rental properties or other real estate holdings for income and investment. Like other real estate properties, investment property is marital property or separate property. Rental property does not get the same treatment as a family home or home where your children are living. A court is more likely to treat rental properties just like other property in a divorce.

Generally, the options for dividing up investment property include selling the property and dividing the profits, making an offer to buy out the other spouse’s interest in the property, or continuing to rent out any property with a business agreement. Most couples want to sever financial connections with former spouses and will opt for one of the first two options. Talk to an experienced divorce attorney if you have questions about dividing investment property in a divorce.