Real Property Division Pursuant to Divorce or Legal Separation

In California, whose name appears on the deed is the beginning of the inquiry, not the end of the story. There is often a significant community property interest in real property even if it was purchased prior to marriage and title is held as the "sole and separate property" of one of the parties. Likewise, there is often a significant separate property right to reimbursement in real property - even if it was purchased during marriage and title held as "Husband and Wife, as Community Property". When parties hold joint title prior to marriage, and one paid more of the expenses (including the interest on the mortgage) prior to marriage, that party may be entitled to an accounting that results in a significant reimbursment of monies expended on the property prior to marriage.

There are several presumptions concerning real property. If the property is held by the parties in joint form, for example, it is presumed to be community property. To learn more about community property and separate property interests in your real property, we will need to examine the history of the property.


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Community Property Interest in Property purchased prior to marriage by one spouse as that spouse's "sole and separate" property

If the community pays down the mortgage balance, or the property is refinanced during marriage, the community will obtain an interest in separate property purchased prior to marriage as the "sole and separate" property of one spouse. If one of the spouses brings to the marriage a residence that is subject to an encumbrance, and the encumbrance is paid in whole or in part with community property during the marriage, the property, while remaining separate, will develop a community property interest that must be divided. The calculuation of this interest is sometimes referred to as the Moore-Marsden interest in the property. In re Marriage of Moore (1980) 28 Cal. 3d 366; In re Marriage of Marsden (1st Dist. 1982) 130 Cal. App. 3d 426.

Where a community loan is used to pay off mortgage on separate property, the parties' respective interests must be determined. To calculate the separate property interest in the residence which one spouse purchased immediately prior to marriage, divide the separate property contributions (down payment and loan amount minus amount by which community property payments reduced principal balance of loan) by the purchase price of the property; to determine the community property interest, divide the amount by which community property payments reduced the principal by the purchase price. The community and separate property percentages can be multiplied by the total appreciation of the property during marriage to calculate the parties' respective financial interests. Be aware that if the purchase money loan was paid off because the parties refinanced during the marriage, this can dramatically change the calculations.

In general, the community property interest in the home is computed by dividing the community's contribution to the purchase price of the home by the purchase price. Where the community borrowed money to pay off the purchase money loan, as with a refinance during the marriage, this may include the amount of the original loan paid off by the new community loan. This percentage is then multiplied by the appreciation of the home during the years of the marriage.

To calculate this interest one must know, at a minimum:

• how title to the property was held

— when purchased

— during the marriage

— now

• the original purchase price

• the amount of the down payment

• the source of funds used for the down payment

• the date of the marriage

• the amount of mortgage principal paid

— prior to marriage

— during marriage

— after separation

• the date of separation

• the fair market value of the property

— when first purchased

— on the date of marriage

— on the date of separation

— on the date of trial

• whether the property was refinanced during the marriage



Right to Reimbursement of Separate Property Utilized towards the Purchase of Community Property or towards the Purchase of the Separate Property of the Other Spouse.

In the division of the community estate, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party must be reimbursed for the party's contributions to the acquisition of the property to the extent the party traces the contributions to a separate property source. The amount reimbursed will be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division. Contributions to the acquisition of the property include down payments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property but do not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property. Family Code, section 2640.


 

Attorney Mark Warfel

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626-301-9327 

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The Law Offices of Mark J. Warfel

Est. 1999



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  Did you know?

Transmutation: the conversion of one form into another, as from separate property to community property.

The most meaningful transmutation, however, may be the conversion of the heart, through love, especially when this motivates you to take actions that are healthy, loving, and mature.


   

 

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