Who Keeps the House in a Divorce?

For many parties considering or in the midst of a divorce, determining how assets and debts are distributed, and to whom, is one of the most pressing concerns. If there is a family home, determining who keeps the house in a divorce is often the first question people will ask. Beyond the financial implications, many have concerns over keeping or selling the home, especially if there are minor children living in the home.

What Factors Determine Who Keeps the House in a Divorce?

California is a community property state, meaning that generally speaking, all property acquired by a married person during the marriage while living in the state is community property (unless you have a prenuptial or postnuptial agreement). However, it is important to note that there are situations where a party can have a separate property interest in assets such as the marital residence.

In order to make a determination of who may keep the family home, we must first analyze the facts of the case and review the parties’ financial situation. Additionally, there are a number of questions that must be addressed to assess if the home is a community property asset, if there is a separate property interest, what the financial options are, and more.

These questions should include, but are not limited to:

1. When were the parties married?
2. When did the parties separate?
3. When was the home purchased?
4. How was it purchased?
   1.  Were there separate property funds used to purchase the home?
5. Does the home have a mortgage?
6. What other assets and or debts does the community have?
7. Can the party who wants to keep the home afford to do so?
8. Can the party who wants to keep the home buy the other party out?
9. Does one party need spousal support?

The answers to the questions above help provide insight into the parties’ legal interest in the family residence as well as their financial capabilities. In the event the family home was purchased prior to marriage, or if one spouse uses some of their separate property for the down payment, the situation becomes more complex as they may be entitled to reimbursement.

How are Mortgages Delt with in a Divorce?

As noted above, we must first determine when the home was purchased. Was the home purchased during the marriage or prior to? Additionally, we need to ascertain if there is any separate property interest. We must also establish if both parties are on the mortgage and whose income was used to qualify for the asset. Once those determinations have been made, there are two common scenarios:

Selling the Marital Home in a Divorce

If both parties agree to sell the home, and it is community property, the home can be sold, the mortgage would then be paid-off and if there are any net proceeds from the equity of the home, the profit would be split equally, in most cases. However, this scenario can get more complex if one spouse used their separate property funds to contribute to the down payment of the home, and the home was purchased prior to the date of marriage.  In that situation, once the house is sold and the mortgage debt is paid, the spouse who contributed their separate property would be reimbursed for the amount contributed and then the parties would split the remaining property equally.

Buying-Out the Other Spouse’s Community Property Interest

In the event one party wants to keep the home, we must first determine if the party who wants to keep the home can afford to buy-out their ex-spouse’s community property interest in the home and quality to either refinance the mortgage or determine if an assumption of the loan is possible. For example, if the home has $50,000 of equity, you and your spouse each have an interest of $25,000. Therefore, if you wanted to keep the family home you would need to buy-out your spouse’s interest by paying a $25,000 equalization payment and be able to qualify for the remaining debt on your own. For some parties a cash buy-out isn’t feasible and the parties agree to trade-off other assets, such as retirement accounts, to equalize.

Regardless of how equalization is achieved, the spouse keeping the home must be able to maintain the mortgage payments on the home either by refinancing the mortgage and qualifying independently, or assuming the existing mortgage. In either scenario, it is important that all financial resources are correctly considered, including spousal support if applicable.

Does Moving Out of the Family Home Impact Who Keeps the Home?

For many families, it is common for one spouse to move out of the family home prior to or during the divorce or separation. There are also situations, such when domestic violence has occurred, where one party may be ordered by the court to vacate the family residence. It is a common myth that if one party moves out of the family residence, they are giving up their interest in the home. However, that is not the case. Moving out of the family residence does not affect who keeps the home. But it can affect financial adjustments referred to as Epstein Credits and Watts Charges.

What Are Epstein Credits?

Epstein Credits are reimbursements one spouse can seek when they use separate property funds to pay-off community debts after separation. Originating from in re Marriage of Epstein, this case established that in California a spouse should be compensated when they use their separate income to maintain a community asset. Epstein Credits are not limited to mortgage payments and can also be applied to car payments, home insurance and more.

When are Watts Charges Applied?

Watts Charges are a financial charge placed on one spouse for the exclusive use of a community assts following separation. Established in the 1985 case, in re Marriage of Watts, the Charges allow a spouse who does not have access to the community asset to receive compensation based on the fair rental value. In this scenario the non-occupying spouse can seek compensation, often calculated as half of the asset’s market rental value per month.

It is not uncommon for Epstein Credits and Watts Charges to cancel-out one another, however there are situations where both Credits and Charges can be applied for a party. In such a scenario one party may have moved out of the family home but they continue to pay the mortgage while the other spouse has exclusive use of the home. Again, having clear documentation of financial contributions and exclusive property usage are essential to requesting both Epstein Credits and Watts Charges.

Most importantly, you need to know that neither Epstein Credits or Watts Charges are automatically calculated or applied, they must be requested by the parties and eligibility is determined based on records and financial contributions. Therefore, it is essential to not only keep detailed financial records, but to consult with an experienced divorce attorney to review your situation, determine the community and separate property contributions and assets to ensure you are properly compensated or reimbursed if applicable.

Does Child Custody Influence Who Keeps the House?

It is a common misconception that when there are minor children that whomever has primary custody of the children gets to remain in the house, but that’s really not the case. For some families, that is what works best, and they are able to afford it, but having primary custody of the children is not the most leading factor.

Often, parents can agree to keep the family home in order to provide stability for their minor children. Typically, the spouse that is to remain in the home needs to find out how to maintain that home on their own after buying-out the other spouse’s community property interest as described above. Whether it be from their earned income, and/or support provided, but they must be able to afford the home on their own.

It is not common, but there are scenarios where the spouses decide to maintain the family residence and have the children stay in the home while the parents swap pursuant to their custody schedule. This gives the children continuity in their residence and allows the parties to live separately. There are solutions for each families’ goals and needs but it all depends on how the assets/debts of the marriage will be distributed and what the parties can agree on and not agree on.

What are Alternatives to Selling the Family Home in Divorce?

As with every scenario, it depends on the parties involved, their financial situation and what they are willing to agree too. It is important to note that for many, the goal of a divorce is to divide assets and move forward as separate individuals, legally and financially.

However, there are situations where parties want to keep an asset where parties are not able to afford buying-out their former spouse’s interest in an asset to maintain it separately. If parties can agree to keep the family residence, they can rent the home to a third party and can develop an agreement on how to split the proceeds. If there is a debt for that asset, such as a mortgage, they must also agree on how much each party will continue to pay. This is not an ideal situation as it continues to tie the parties to one another, not only in ownership but by the mortgage and debt that it carries. Furthermore, the continued financial responsibility of the home post-divorce can make it difficult for either party to purchase another home while keeping their name on the mortgage for the marital residence. Thus, selling the home or having one party buy-out the other’s community property interest is often the best option for parties.

Negotiating or Litigating Who Keeps the House in a Divorce

Having an experienced family law attorney can help you determine your rights, interests, and explore opportunities to bring resolution. The Reape-Rickett Law Firm has decades of experience in resolving property disputes, from identifying and correctly characterizing property interests, to negotiating settlements, our team has helped thousands of families navigate their options for the marital residence.

When parties are unable to reach an agreement as to who will keep the home, or if there are disputes as to how the property interests should be divided, the parties can petition the court to decide. Our family law property division attorneys are experienced litigators, regularly advocating for their client’s best interests across courtrooms in Los Angeles, Ventura, and beyond. Our family law attorneys partner with our clients to understand their goals, review the facts of their case to identify their property rights and interests, and craft compelling strategy to advocate our client’s needs to the judge.

If you have questions about who keeps the house in a divorce and other property issues, our attorneys can review your unique situation and help you plan for the path ahead. Contact our team today at (888) 851-1611 or Reach out to our team Here to get the answers and guidance you need to move forward.