The Family Home
Dividing the Family Home in Your Florida Divorce Case
Many people going through a divorce want to keep the marital home for emotional reasons. It’s easy to understand why, especially when there are younger children. Keeping the home can provide the kids a stable and consistent environment – where a move would create “one more change” during the middle of the divorce.
However, despite the best of intentions, the family house is often sold within one or two years after the divorce. The reason is easy to understand. Most couples pool their income and assets to buy a house and make the monthly payments. After the divorce is finalized the person who “wins” the house is usually left with all the costs and payments. Worse, when someone wants something in a divorce, primarily for emotional reasons, they often “pay too much.”
My suggestion is to imagine your future self a year or two after the divorce. Will the total income available to pay the mortgage have increased or decreased? (Usually, decreased because there is only one of you). As your house ages, will the maintenance costs increase or decrease? (Probably, increase – especially given the weather in Florida). You get the point. And the kids? Often children are more adaptable than their parents. Ask yourself what, is more important to your children – keeping the house, or having a parent who is focused on the child’s needs and who is not financially stressed beyond capacity.
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Who Gets the Family Home in a Florida Divorce?
In a Florida divorce, the family home is part of the court’s division of marital assets and debts. In Florida this division is called “equitable distribution.” The court starts with the presumption that the distribution of assets and debts should be equal. However, there are nine “factors” the court can look at make an unequal distribution.* I am not going to review each factor, but the 9th factor is whatever factor the court finds necessary to “do equity and justice” so the court has a lot of discretion when it comes to dividing a couple’s assets and debts. Even though the court has the power to distribute assets unequally, in my experience the court usually stays close to a 50/50 division. (Your specific circumstances may be an exception).
Let’s assume that the martial home is worth $200,000 and has a $100,000 mortgage. Also assume that the martial home and the mortgage are the couples only asset and debt. If the home is sold, a 50/50 split will result in each party receiving $50,000. That’s $200,000 – $100,000 = 100,000, and then divide that number by 2 (Less closing costs). To achieve this same result, if the house and mortgage are awarded to one spouse, the party receiving the house would need to make a $50,000 “equalization payment” to the other spouse. In most cases, the person receiving the home finances this payment by refinancing the home and taking on an additional $50,000 in debt.
Who get the house if it is not ordered sold? There is no certain answer to this question, and the court has wide discretion. Most cases are settled, so the question is resolved by agreement. In a contested case, I think the court tends to do the following:
- Do the parties agree to sell the house? If so, then the house will be sold, and the proceeds divided in a way the court believes is fair.
- Do both parties agree that one spouse should be awarded the house? If so, then the house will be awarded to that party as part of a total division that the court determines is fair.
- Does one party want the house, and the other party want the house sold? This requires a second step: After taking alimony and child support into consideration, can the person who wants to stay in the house afford the house? If so, then the court will likely award the house to the requesting party. If not, then the house will likely be ordered sold.
- Do both parties want the house? If both parties can afford the house, then the court will likely award the house in a way that the court finds best for the children. If there are no children, then court will likely award the house to the party that values the house the most in economic terms.
If the court awards the house to one party, it usually solves the fairness problem in one of three ways:
- An award of other assets, like retirement accounts, in a manner than moves the equitable distribution toward 50/50.
- Orders the party receiving the house to make an equalizing payment to the other spouse. (Usually with a finding that the home can be refinanced in a way that frees up the funds for this payment).
- Awards exclusive use and possession of the residence for a set period of time – with the “equalization” to occur at a later time.
* Section 61.075(1), Florida Statutes.
In Florida, Does the Court Take the Children into Account When Awarding the Marital Residence?
Yes. Under Section 61.075(h) Florida Statutes, the “desirability of retaining the martial home as a residence for any dependent child of the marriage” is one of the factors the court can look at in deciding whether to award the home to a spouse.
In awarding the home in this manner the court can even award a party “exclusive use and possession” of the house – which can really help the “financially disadvantaged” spouse. Exclusive use and possession must be awarded for a particular period of time. (For example until the youngest child is emancipated). During the period of exclusive use and possession, the parties remain co-owners of the property, but one spouse is barred from the residence. After the end of the exclusive period (the youngest child emancipates) the house is sold, and the proceeds are divided in a way previously determined by the court. (Usually 50/50). With exclusive use and possession, the court can divide an asset 50/50 without requiring the party receiving exclusive use and possession to make an equalizing payment.
Back to our example above, let’s assume that one spouse is granted exclusive use and possession of the house for five years, after which it will be sold. With exclusive use and possession, the sale of the property occurs five years from now, with each party receiving $50,000 of the $100,000 home sale proceeds. However, one party has had use of the residence (and the other party’s $50,000) for five years before the house is required to be sold.
During the period of exclusive use and possession, the court has wide discretion in regard to who pays what bills related to the home. For example, the party residing in the house could be required to make all payment, and pay all home related bills. At the other extreme, the party forced out of the residence could be required to pay all bills. Or the bills could be divided in whatever manner the court finds fair.
How Do You Get Your Name Off the "Mortgage" If the Home Is Awarded to your Spouse?
- This is where then non-attorneys sometime really screw things up. Many people mistakenly believe that if they “quit claim” a deed to their spouse, they are off the hook in terms of the mortgage. That belief is wrong, and it helps to walk through this one step at a time:
- If you and your spouse borrowed money to buy your house, you likely borrowed the money by signing a promissory note. You will receive the property in the form of a recorded deed from the seller.
- The bank will secure the promissory note through a mortgage on the property. The mortgage is not what you owe. Instead the mortgage is how the bank secures payment of the note. (If you really want to dig deep into the fine print, the mortgage creates some additional responsibilities on the part of the borrower).
- Regardless of whether you transfer title of the property to spouse alone, you will still owe the bank the full amount of the promissory note. If your spouse stops making payments on the promissory note, your credit will be ruined, and the bank can pursue you for the unpaid balance of the promissory note. (Plus all kinds of horrible fees). It is true that the bank’s first line of protection is to foreclose, and force a sale of the residence to pay off the note. However, your credit will still be ruined, and the bank can pursue you for a deficiency – the the difference between what the bank was owed, and the amount of the foreclosure sale.
If you want to transfer the property to your spouse as part of a settlement, you should:
- Consider holding the deed until your spouse has refinanced the property exclusively in his or her name. (You would provide the deed at the time of the refinance as part of the closing).
- Have a set “drop dead” date by which time your spouse either must successfully complete the refinance (out of your name), or list the house for sale.
- Provide specific language about how the sale will occur if the refinance is not accomplished by the “drop dead” date. This should include the name of the broker, the means of valuing the property, how inspection items are to be paid, how the property will be maintained, etc.
- Have strong “indemnity” language in the agreement so that you can demand that your spouse make the payment to the bank, and have your spouse held accountable for all your fees and costs in upholding the agreement if he or she quits making payments.
- Make sure the court retains jurisdiction to enforce these requirements.
Does It Matter How a Home Is Titled in a Florida Divorce?
Sometimes. Generally, asset and debts acquired during the marriage are presumed to be “martial,” regardless of how titled. So, if you used marital funds to purchase a house, that is titled in the name of just one spouse, the presumption is that the house is still marital.
However, the reverse is not true. If you title your nonmarital house in the name of you and you spouse as tenants in the entireties, the presumption is that the house is now marital. The same is true if you provide non-marital funds toward the purchase of home titled as tenants in the entireties. The exact language from the statute creates a presumption that property is “marital,” if it is “held by the parties as tenants by the entireties, whether acquired prior to or during the marriage. . .”.