Divorce and Property Improvements by One Spouse
How is property characterized in a divorce?
Property will be distributed according to whether it is considered shared or separate property. Marital property, also known as “community” or “shared” property, is owned by both spouses and will be split equally between the two parties upon divorce. In contrast, non-marital, or “separate” property is owned by only one partner and will be distributed to its owner in full upon divorce.
Each state has different laws which determine how specific items of property are to be classified during and after marriage. These can vary widely from region to region, so be sure to check your local laws regarding property characterization.
How are improvements of properties treated after divorce?
A common situation arising in a divorce is when one spouse has made improvements to a property interest such as a home or a business. For example, one spouse may spend money on upgrading the roof of a marital home.
The main inquiry is usually whether the spouse can be reimbursed for expenditures on the improvements. To determine who is entitled to reimbursements for improvements, the following factors need to be considered:
- Whether the improvement was made for the spouse’s own property or for property belonging to the other party, or for community property
- Whether the property was considered shared or separate property before the improvements were made
- Whether the individual spouse used community funds or separate funds for the improvements
What guidelines do courts follow when dealing with improvements?
Again, state laws vary widely regarding these issues. However, a court will typically rule according to the following guidelines:
When one spouse makes improvements to their own property:
- The community is entitled to a reimbursement of the improvement costs if the spouse used community funds to improve their own separate property
- If no community funds were used, the property will remain separate property; the other is not entitled to collect on the increase in the property’s value
When improvements are made to the other spouse’s separate property:
- If one spouse contributed their own separate funds to improve their spouse’s separate property, they may be entitled to reimbursement
- If community funds were used to benefit the other party’s property, some jurisdictions assume that the improvement was made as a gift to the other spouse, and they are not entitled to reimbursement
When the improvement is made to an item of shared property:
- A court will usually presume that the improvement was intended to benefit the communal property, and so the property will be distributed equally between the parties
What are some other factors to consider regarding improvements?
One of the main difficulties in allocating the cost of improvements is determining the value of the property before and after the improvements. An expert appraiser is sometimes consulted to make these calculations, especially if it cannot be determined how much one spouse spent on the improvement.
Another point is that improvements generally do not have the effect of converting separate property into community property. This is particularly true if the property retains the characteristics of separate property.
Finally, not all improvements will increase the value of property. An improvement can actually decrease the value of property, for example if it violates zoning laws or homeowner association rules. This should be brought to the attention of the court if necessary.
Do I need an attorney for an issue with property improvements?
As you can see, there are many different factors involved in the calculation of improvement expenses. It would be wise to consult with a lawyer regarding these complex matters. An experienced family law attorney can help you prepare the necessary documents for reimbursement, and can research the various laws in the event that different states are involved.
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Last Modified: 03-19-2013 03:47 PM PDT
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