A divorce presents many challenges for all involved. In addition to the custody of children, a jointly owned home can cause great difficulties in the event of a divorce. Who is allowed to continue living in the house? Who takes on the mortgage? What about affordability?
In the event of a divorce, emotions come to the fore. Often, there is a bitter fight for custody of children, favourite items and assets. When a couple separates, the rules of the applicable matrimonial property regime are decisive. If no other matrimonial property regime was stipulated in a prenuptial agreement, the matrimonial property regime of community property automatically applies – the most common set of rules for married couples.
In the event of a divorce, assets are divided into personal and jointly acquired property. Personal property includes assets that were brought into the marriage or earned before the marriage. But it’s not just personal assets from before the marriage that count as the personal property of each spouse. It also includes inheritances and gifts received during the marriage.
On the other hand, jointly acquired property covers everything that was earned together since the start of the marriage. If a couple is now divorcing, each spouse is eligible to receive their personal property plus half of the jointly acquired property – even if, for example, only one of them was responsible for making a living and the other person stayed at home to look after the children. There are of course exceptions, but these must be recorded in a prenuptial agreement.
When divorcing, the type of ownership of the property is key: sole ownership, co-ownership or joint ownership. In the case of sole ownership, it’s clear that the property belongs to only one member of the couple. If a house is jointly owned, it belongs to both spouses equally, regardless of who has paid how much for it. This has to be regulated in the prenuptial agreement and correspond with the matrimonial property regime of the community of property.
However, most married couples with a matrimonial property regime of community property or couples with a cohabitation agreement have bought a property together and are therefore co-owners with half the property each. For this reason, there are three solutions for what to do with a home in the event of a divorce:
In the case of co-ownership or joint ownership, both spouses bear joint liability for any mortgage debt. So if the property isn’t sold or isn’t transferred to sole ownership by one of the spouses, both spouses bear liability for the debt – regardless of who remains living in the house. The bank has the right to choose who should repay the debt. But at the same time, the bank will deem the other spouse liable in order to have greater security. If you want to transfer the property to one of the spouses during the divorce, the bank may also reject this. If the property is no longer affordable because of the change in financial situation, the bank may refuse to transfer the home, so it then needs to be sold. If you want to avoid selling the property in any situation, the mortgage interest rate can be transferred to the spouse who earns the most. In turn, they then get the right to use and benefit from the property. In most cases, however, the couple wishes to avoid continuing to live in the same house and a sale is often the only solution.
Make sure you’re getting the best advice and don’t rush. Our estate agents will support you with any issues you may have, no matter whether it’s the sale of the property, distributing the profit or looking for a new home. The best course of action is to get in touch with your nearest Engel & Völkers shop. We’ll be happy to help relieve the burden of this difficult situation and support you in any way we can.
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