What happens to a property after a Divorce?

divorce, separation, marriage breakup

When the love nest turns into an apple of discord: When a couple split up, a question is often unprepared: What will happen to the property they share after the divorce?


Divorces are always tricky, but when children or shared property are added, it becomes even more complicated.


The law states that in divorce proceedings, all consequences for the time after the marriage must be clarified. If the still-married couple owns real estate, this has a considerable influence on maintenance and the so-called gain compensation.


Couples who want to separate should be aware of the unique features of a divorce with residential property.


Relationships without a marriage contract are profit sharing-


As a rule, marriages are made out of love. A marriage contract is usually frowned upon there. Too unromantic.


And who wants to worry about the fact that the happiness of love could be over sometime. However, it is essential to know that spouses without a marriage contract live in a community of gain.


This is stated in § 1373 of the Civil Code (BGB): “Gains are the amount by which the final assets of a spouse exceed the initial assets.” This means that the assets of the individual spouses remain separate even during the marriage.


If a divorce does occur, the gain is balanced.  This means that the assets acquired during the marriage are financially balanced between the spouses.


There is another complicated point for couples who own a shared property: The gain compensation is a pure cash payment claim. However, houses or condominiums are not so easy to divide.


So the spouses have to agree on how to deal with the property to share it financially. There are various possibilities, such as selling the property together and dividing the proceeds among themselves or having one partner pay the other and take over the property.


If an agreement cannot be reached, a court will decide in an emergency. However, this usually involves much higher costs than an amicable settlement.


Divorce with real estate ownership has some unique features. An important factor in determining how to proceed is whether the property is jointly owned or whether it is the sole property of one spouse.


Divorce with real estate solely owned by one spouse

If only one spouse is registered as owner in the land register, then after the divorce, he or she will also own the house alone.


As a rule, the spouse also retains the residential property and remains living in it. “In principle, however, a court can also assign the married apartment to the non-owner for use during the separation period,” explains lawyer Leder.


However, this is only possible if this spouse can prove that he or she cannot find an affordable apartment for himself or herself and the children he or she looks after. But this does not change the ownership of the other.


However, a house or apartment as the sole property also has financial consequences.


For example, homeownership also leads to compensation for gains. This would be the case if the house were bought, built, or extended during the marriage.


In the case of an extension or modernization, it is also irrelevant whether the spouse already owned the house before the wedding. An inherited house is part of the exempt initial assets and only falls into the gain compensation if it was extended or modernized during the marriage.


This increase in value must be taken into account in the equalization paid.


Special provision: Property compensation in the event of divorce under GDR law

If the spouses were already married in the former GDR, the compensation of the gain is somewhat more complicated. In the GDR, married couples lived in a so-called community of achievement. In principle, all property acquired during the marriage became joint property.


However, a property bought inherited or given as a gift by a spouse before marriage remained sole property. If the spouses built a house together on this property or extended or modernized an existing home, this did not change the entry in the land register – the house remained in sole ownership.


If a couple married in the GDR divorces today, the cut-off date for the initial assets is not the actual wedding day, but October 3, 1990. On this day, the BGB also came into force in the new federal states.


This, however, would prevent an equalization of assets if the purchase, expansion, or modernization took place before reunification. Therefore, in such cases, the provisions of the GDR Family Code on equalizing property (§§ 39, 40 FGB) are still applicable today if a spouse was already the sole owner of the GDR property.


Divorce with shared property

If the property belongs equally to both spouses – or even only proportionately, for example, two and a third – then the separation raises several questions.


Who owns the joint residential property after the divorce? Who may live in it? What happens to it? These questions are all built by one fundamental problem: divorce does not automatically mean that co-ownership ends.


Even divorced spouses must – as long as no other arrangement has been found – maintain and finance the property. However, this is only possible in the rarest of cases. It is usually better to consider one of the following solutions:


  • The property is taken over by one partner, and the other is paid out. This usually represents again, which can affect the compensation of the gain.


  • The real estate is sold together, and the profit is divided.


  • The real estate is transferred to an ordinary child.


  • In rare cases, real estate property is divided into two equally valuable self-contained units. This might be appropriate, for example, if a larger single-family home can be converted into a two-family house. In technical language, this is called real division.


  • If there is no agreement on the division of the real estate, the last option is a division auction, in which the real estate is publicly auctioned through an enforcement court.


Transfer of ownership

The transfer of ownership is legally simple if the separated spouses agree on who will keep the property and pay the other for it. Both partners must notarize the declaration that the co-ownership of the property is transferred to another partner if both are present at the same time.


Afterward, the transferee must pay the agreed price. It may be worthwhile to have a valuation report drawn up for this purpose. In addition to the settlement amount, the spouses must clarify the payment modalities, particularly the due date of the payments.


Once the financial matters have been settled, the notary public applies to have the change of ownership entered in the land register. The issue is then already decided.


However, the maintenance and compensation for gains should be clarified beforehand; otherwise, both parties may be threatened with financial disadvantages later on.


The transferor has received a large sum of money, which is included in the final assets. On the other hand, the person taking over still does not have to pay rent, which increases disposable income and can result in a higher maintenance obligation.


It is also essential for the transferor to be ultimately released from liability for a current property loan. Without the bank’s prior written consent, the notarized agreement cannot, therefore, be notarized.


Current real estate loans in case of divorce

In many cases, the jointly-used property has been financed by a loan. The loan agreement must be considered independently of all other issues – ownership, use, and any payments for use or rent. The fact that the loan has to be paid off does not change with the separation.


However, how it is paid may change. If, for example, the sole earner previously paid the installments alone, it was previously assumed that the other spouse would make contributions that could be regarded as equivalent, for example, in the form of housekeeping.


If a couple separates, this is no longer the case, and the cards are reshuffled: in the future, both partners must pay the installments in equal parts. If only one continues to pay, the other is obliged to compensate him or her.


Also, the fact that one partner may not have the financial means to do so is not sufficient, according to a BGH judgment, to release him from joint liability for the loan (Ref.: XII ZR 10/09). This joint liability can, however, be immoral under certain circumstances.


This is the case, for example, if it was foreseeable that one of the two partners would be considered overburdened financially – because he is penniless – but should nevertheless co-sign the loan agreement at the bank’s request.

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