Who Gets the House in a California Divorce?

Determining who will keep the family home—or whether it will be sold to a third party—can be one of the most difficult decisions in a California divorce. A house is often the family's most valuable asset. In addition, people have an emotional attachment to their home. And when there are children involved, additional emotional and practical considerations come into play.

There are many things to keep in mind when figuring out who will keep the house or whether it will be sold, including: where the children will live, whether either spouse can afford to keep the house after the divorce, tax implications, and reimbursements.

Here's an overview of what might happen to the family house in a California divorce. But, because of the complexity involved in dividing a house in a divorce, it's a good idea to consult with an attorney for advice about what options might apply in your situation.

• Whose House Is It?
• Who Gets the House in the Divorce?
• Reimbursement Issues

Whose House Is It?

The first step in figuring out how to allocate the family home in a divorce is to determine who owns it. In California, the court must perform an analysis of whether the property is community property (belonging to both of the spouses) or separate property (belonging to only one of the spouses).

Community Property Presumption

Under California law, the court presumes (automatically assumes) that property acquired during the marriage is community property. This means that each spouse has an equal ownership share in the property. There are some limited exceptions to this presumption—for example, when a spouse acquires property by gift or inheritance during marriage, the court will instead classify the property as belonging to the receiving spouse alone.

A straightforward example would be when the spouses:

• bought the home together during marriage
• used only community property funds to complete the purchase, and
• are both on the title to the house.

All property that's acquired during marriage by the spouses as joint tenants is presumed to be community property, and there's no factors that might contradict this presumption. (Cal. Fam. Code § 2581 (2022).) So, in this situation, the home is community property, and both spouses share an equal ownership interest.

Sometimes, however, facts regarding the ownership of a home are not that simple. For example, in some cases, the title to a home purchased during marriage is in the name of one spouse only. In this situation, the title creates a presumption that the house belongs to the spouse whose name is on title, and is therefore the spouse's separate property. (Cal. Evid. Code § 662 (2022).)

The other spouse can overcome this presumption by showing that the spouses had an agreement or understanding that the house belonged to both of them, even though they were not both on title. Rebutting the presumption created by title can be very difficult, however, and requires strong evidence that the intent was for the house to belong to both spouses.

Separate Property Owned before Marriage

When a spouse buys a home before the marriage, that home is generally that spouse's separate property. However, the situation becomes more complicated when the spouse who is not on title contributes money to the mortgage or payments for improvements to the home during the marriage. In this case, that spouse would have an interest in the home, which can be significant, especially with a long marriage.

Who Gets the House in the Divorce?

If the house is separate property, the owner-spouse will get the house. If the house is community property, there are several ways it can be divided, either by agreement or court order, in the divorce judgment.

Sell and Divide Profits (or Losses)

Spouses can agree to sell their home and split the profits from the sale. This is often the only feasible option when neither spouse is in a financial position to own the home alone. If the home is "underwater"—meaning the spouses owe more on the house than it can be sold for—the spouses will share equally in the loss.

Spousal Buyout

Another option is for one spouse to take full ownership of the home and pay the other spouse their share (called a "buyout"). The buying spouse usually will need to refinance the home in order to remove the selling spouse from the mortgage.

In determining whether the buying spouse can afford to take on full ownership of the home, many costs need to be considered, including:

• monthly mortgage payments
• insurance
• utilities, repairs, maintenance, and
• property taxes.

Tax implications are also an important part of the financial equation. You need to determine whether the buying spouse would be entitled to a home mortgage interest tax deduction.

In addition, sometimes the court will order (or the spouses will agree) that the selling spouse pay the mortgage as a form of spousal support. In most instances, spousal support is not tax deductible, but it's a good idea to contact a tax consultant to find out what the tax consequences of any arrangements regarding the family house might be.

Spouses Stay on Title (Deferred Sale)

When the spouses have minor children in common, the court may make an order that temporarily delays sale of the home. This is called a "deferred sale of home" order. Under this scenario, both spouses continue to own the home jointly for a set period, giving the custodial parent exclusive use and possession of the home during this time. The purpose of a deferred sale order is to minimize the impact of the divorce on the children.

In considering a deferred sale order, the court first must determine whether the spouses will be able to afford the payments on the house after the divorce. The court will look at the spouses' incomes, the availability of support, and other funds available to make payments.

If the court finds that a deferred sale is financially feasible, the court must then decide whether a deferred sale is necessary to minimize the impact of the divorce on the children. The court will consider all of the following factors:

• the length of time the children have lived in the home
• the children's ages and grades in school
• how close the home is to the children's school, child care, and other services the children use
• whether the home has been modified to accommodate a physical disability of a child or the custodial parent, such that moving homes would make it more difficult for the custodial parent to meet the children's needs
• the emotional impact moving homes would have on the children
• the extent to which the location of the home allows the parent living there to maintain employment
• the financial ability of each spouse to obtain suitable housing
• the tax consequences a delayed sale would have on each party
• the negative financial impact a delayed sale would have on the parent not living in the home, and
• any other factors that the court finds are relevant and fair to consider.

An order for a deferred sale will specify how long the order is in place, after which time the spouses will sell the home.

Reimbursement Issues

Whatever the disposition of the home will be, when determining each spouse's interest in the home, the court will consider whether either spouse is entitled to reimbursement from the other. A spouse might be entitled to reimbursement in the following situations:

Community Funds Paid for Separate Property

As discussed above, when a spouse purchases a home before marriage, it is separate property. But, if community funds are used to make mortgage payments or improve the separate property home during the marriage, the other spouse acquires an interest in the home. During the divorce, the court will use a formula to calculate that spouse's interest in the home, and the spouse will be reimbursed for those contributions.

Mortgage Payments after Separation ("Epstein Credits")

Under California law, the court can order that a spouse be reimbursed when they use separate property funds to pay the mortgage on a community home after the date of separation and before the divorce, unless it would be unfair and unreasonable for that spouse to expect reimbursement. (Cal. Fam. Code § 2640 (2022); In re Marriage of Epstein, 24 Cal.3d 76 (1979).)

For example, the court will not order reimbursement if the spouses agree there will be no reimbursement, the payments were intended as a gift, the spouse making the payments continued to live in the home and the payments were not substantially greater than the rental value of the home, or the payments were made in lieu of or as a form of spousal support.

Charges for Exclusive Use and Possession of Family Home after Separation ("Watts Charges")

Sometimes, one of the spouses will stay in the family home while the divorce is pending, while the other moves out. A court can order the spouse who has exclusive use and possession of the family home between separation and divorce to pay the other spouse the fair rental value of the home for that time period. (In re Marriage of Watts, 171 Cal.App.3d 366 (1985).)