How to conciliate divorce and real estate

Divorce

1.     Separation

Protective measures for the conjugal union

Unless there is a common agreement, it is not possible to divorce before a two-year common-law separation of the spouses. During this period, it is possible to organize the judicially separated life through a procedure known as "protective measures for the conjugal union". During this period of separation, the question of the attribution of the conjugal domicile arises: which spouse will be able to stay there? And although both are potentially co-owners (or not), in the end this does not change the situation much..

Allocation of the family home at the time of separation

In the case of a separation, a predominant element in the judge's assessment is the avoidance of uprooting the children. In this sense, one will avoid, for example, dislodging the wife if she has custody of the children (it may be the other way around). In this case, the wife will therefore be slightly privileged over the husband to be granted the marital home.

If one of the spouses works in the marital home in a liberal profession (doctor, dentist, lawyer, etc.), he or she may invoke this preferential element to obtain the attribution of the marital home. In this phase of separation, the attribution of the domicile is preferably given to the spouse with a preponderant interest. In other words, to whoever objectively needs it the most. The judge proceeds to what is called a "weighing of interests". Whether the wife has custody of the children or the husband has his medical practice within the home, there is no absolute truth: it is the judge who decides.

2.     Divorce

Allocation of family housing

In order to initiate divorce proceedings, in case of disagreement between the spouses on the principle of divorce, a two-year separation period must have expired. If the couple has been separated for two years and one of the two parties opens the divorce proceedings, how will the divorce judge allocate the family home when the future ex-spouses cannot agree on this point?

There are several scenarios

In the case of a lease, if the spouses are co-owners of the lease, the judge may assign the lease to one or the other spouse individually if there are important reasons for doing so and this decision can reasonably be imposed on the other spouse.

If the real estate belongs exclusively to one of the spouses, the latter will in principle have the right not only to dispose of it but also to fully use and enjoy his or her home after the divorce.

In certain cases, when important reasons justify it, for a limited period of time and in return for a fair compensation, the ex-spouse who is not the owner will be able to benefit from a right to live in the dwelling, allowing him or her to live there, to the exclusion of the ex-spouse who is the owner.

If the family dwelling (and more generally any other property) belongs to both spouses in co-ownership, they will have to reach an agreement in order to settle, if possible, this question within the framework of the liquidation of the matrimonial regime. Can one of the former spouses take back the co-ownership property on his or her own and disinterest the other? Must this property be sold to a third party?

If there is a disagreement between the spouses, it is possible for the judge to attribute the co-ownership property to the spouse who requests exclusive attribution and who has a preponderant interest. The spouse who is attributed the property will have to disinterest the other spouse. Finally, the judge may not settle the question of co-ownership and attribute a right of habitation on a former spouse's share of co-ownership so that only one of the co-owners may live there for a limited period of time, thus leaving the former spouses time to find a solution to the division of this co-ownership.

Property in the liquidation of the matrimonial regime

When it comes to real estates, the liquidation of the matrimonial regime has particularities. In the context of the liquidation of the participation in the acquests (the matrimonial regime applies automatically between the spouses unless they decide otherwise by contract before a notary), it is first of all a question of determining to which estate the real estate belongs: the estate of the acquests or the estate of the equity capital?

This has a decisive impact, because the value of the spouses' acquests at the time of the divorce judgment is shared equally between them. Schematically, the real estate will be an acquisition if the equity capital used to finance it comes (mostly) from property acquired for valuable consideration during the marriage, that is to say, in principle, from the spouses' salary savings during the marriage. On the contrary, if the equity comes from an inheritance, pre-marital savings, or a donation, the real estate will be qualified as own.

If it is a purchase, the value of the property at the time of the judgment will be shared by two. It does not matter whether the property is co-owned or wholly owned by either spouse. The means of determining the value of the property (including its cyclical increase in value since the purchase of the property) will most often be carried out by a real estate appraisal. 

This case is the most simple one. If the property is a purchase, or its share in the case of co-ownership, it will only be necessary to know its value at the time of the divorce decree, to deduct all the mortgage charges from it, then to divide it by two, to determine what is due to each spouse.

If the property (or the share in the case of co-ownership) is an own property, its value will belong to its owner, without the latter having to share it as part of the liquidation of the matrimonial regime. This case is also relatively simple. It should also be noted that in the case of co-ownership financed exclusively by a spouse's own property, the spouse will be entitled to the value of his or her spouse's share (including the capital gain). This is one of the effects of what is called the capital gain claim (here in the example of an own property in co-ownership). But the reality is often more complex than the principles presented above, because it happens, even if the property is an own property, that the amortizations of the mortgage debt have been carried out by acquirers. Work on the property may also have been financed by mortgages.

In this case, the assets of either spouse will have a "claim" against the assets of either spouse. It will be necessary to determine the value of these amortizations and the capital gain of the property corresponding to this value. The latter, and the related capital gain, will be shared equally between the spouses.

A consequence of all this is that even if the depreciation is paid entirely by the salary of the spouse who holds the property as his or her own, the other spouse will still be entitled to half of the value of the depreciation and the related capital gain.

In order to define how much each spouse is entitled to on a property belonging to one and/or the other spouse, the calculations are therefore quite complex. Sometimes, in the canton of Vaud, a notary is in charge of the liquidation of the matrimonial regime as an expert in the divorce proceedings. He will sometimes enlist the services of a real estate expert to evaluate the value of the property.

Defining the increase in value of real estate property

First of all, it is necessary to define the capital gains that led to an increase in the initial value of the property. Works or extensions can be considered as a capital gain. They are then financed through a new mortgage, either by salary or savings. They are all taken into account and added to the initial value. There is also the cyclical capital gain to be taken into account. If the capital gain is qualified as an interest, it is then divided by two at the time of the divorce even if one spouse earns three times more than the other.

For a spouse who has inherited real estate, he or she should not think that, in case of a divorce, he or she is not exposed to the risk of sharing at least part of the value of this real estate at the time of the divorce. In fact, if he pays the amortization of the debt by means of the rents obtained (which are acquests), he will have to share the value of these amortizations and the related capital gain by half at the time of the divorce.

In this case, the heir spouse could certainly enter into a matrimonial contract with his or her spouse in which they would provide that the rents be qualified as own. This income would then become own property that would not be part of the acquests and therefore not divisible at the time of the divorce.

For more details, personalized advice and guidance, we suggest you contact a Cardis Sotheby's International Realty expert who will know how to best guide you through your real estate procedures.

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