Dividing the House in a California Divorce

If you and/or your spouse own a home, you’re probably wondering what will happen to the house in divorce. Good question! The answer, unfortunately, can be complicated depending on your unique situation.

Below are some common scenarios, each with their own steps and considerations. Be mindful that this is no way a comprehensive analysis of the law with respect to real property division. Treat this as a rough road map to discuss with a seasoned Family Law attorney.

Scenario #1: Home Bought During Marriage, Titled in Both Spouses’ Names

This is the simplest analysis. The spouse who wishes to keep the house (the “in-spouse”) must reimburse the other spouse (the “out-spouse”) for half of the home’s equity, if any. If there is a mortgage on the property in both spouses names, the in-spouse must refinance the loan into their own name. The refinance kills two birds with one stone: 1) it removes the out-spouse from the loan, and 2) provides the funds for the buy-out. If the in-spouse is not qualified for the refinance, they will not likely be able to keep the house. In that case, the out-spouse may want to keep the house, provided they qualify for a refinance. Otherwise, the house will most likely get put on the market and sold. The profits should be divided equally, absent any reimbursements or credits owed to either spouse.

Short Story: One spouse keeps the home (pending refinance) and buys the other out.

SCENARIO #2: Home Bought Before Marriage, Titled in One Spouse’s Name

Presumably, the in-spouse in this scenario is the spouse whom owned the home before the marriage. The home is the in-spouse’s separate property. However, if a mortgage on the property was paid down during the marriage from community sources, the community is owed a reimbursement under what is known as a “Moore-Marsden apportionment.”

The concept behind this apportionment is that joint funds were used to benefit a separate property interest. Therefore, the community acquires a dollar for dollar interest in the equity in the property. Any appreciation must also be apportioned between the community and separate property estates.

When improvements are made to a party’s separate property residence with community funds, the community estate may claim the greater of a) the cost of the community improvements or b) the appreciated value resulting from the improvements.

This scenario will likely require a forensic accountant to determine the exact nature of the separate and community estate values.

Short Story: Original owner keeps the home and reimburses the other for 1/2 the community interest.

SCENARIO #3: Home Bought Before Marriage, Titled in Both Spouses’ Names During Marriage

If the title changes form during the marriage such that the spouses take title in the form of joint ownership, then the home is considered community property. The same principles outlined in our first scenario apply here. However, the spouse that owned the house before the marriage has a separate property interest in any equity that existed at the time of the transmutation. For example, if there was $100,000 of equity in the home at the time the title was changed to both spouses, that equity is the original owning spouse’s separate property. They are entitled to take that amount off the top prior to any division.

Short Story: One spouse keeps the home (pending refinance) and reimburses the other for 1/2 the community interest. Original owner is reimbursed their separate property interest.

SCENARIO #4: Home Bought During Marriage, Titled in One Spouse’s Name

Generally, California law states that property acquired during a marriage is community property. However, if only one spouse has their name on the title (or Deed), a presumption is created such that the house is actually considered that spouse’s separate property. This is a common scenario where one of the spouses has poor credit and cannot be put on the mortgage with the other spouse.

The other spouse may be able to overcome this presumption by showing an agreement that the house belonged to both of them. Rebutting the presumption is not easy. It requires convincing evidence demonstrating an intention for the house to belong to both spouses. “Pillow talk” is generally not considered strong, convincing evidence.

Where a home is transferred from both spouses to one spouse during marriage, undue influence may come into play. As discussed above, there is a title presumption in California. Undue influence may overcome this. This issues arises where a transaction during the marriage benefits only one spouse. Where the presumption of undue influence is found to arise, the burden of proof shifts to the advantaged spouse to show that there was no undue influence before they can claim the house is their separate property. Raising an undue influence claim, or rebutting one, is incredibly fact-specific and will turn on the strength of the evidence.

Short Story: Get a lawyer!  All jokes aside, title and undue influence will need to be examined to determine proper result.

Final Thoughts

Confused yet? You are not alone. Dividing the house can be one of the more complicated issues in a divorce. Issues with the title or reimbursement claims further complicates matters. The case law is also constantly evolving on this topic. You may consider consulting with an experienced family law attorney to navigate these issues.

The Zarin Law Firm, APC handles all aspects of a divorce case, including division of property. We are seasoned negotiators and litigators and strive to achieve the best result for our clients. If you are going through a divorce in San Diego County and would like a complimentary consultation, please fill out the form below or call us at (619) 800-4189 to schedule a phone appointment with a family lawyer.