Q. I left my husband two years ago, after much verbal abuse. He has been
living in our family home, while I've been forced to stay with our
adult daughter. Doesn't he owe me something for this? I intend to
file for divorce.
A. When there are two people and only one house, upon separation the person
who stays often gains an unfair financial advantage.
A spouse who remains in possession of a jointly titled family residence
is enjoying the beneficial use of the parties' community property.
This may create reimbursement rights in favor of the community estate.
These are generally measured as its fair rental value (FRV) minus the
amounts he pays to preserve and maintain the asset. Your share is one-half
For instance, if the home could be rented at $1,100/month and your husband
makes payments of $750 on the mortgage, he is underpaying the FRV by $350
each month. While you do benefit to the extent that these expenses are
being paid by him rather than by you (or rather than not at all), you
are not being fairly compensated for his exclusive use of this jointly
He would owe this $350/month to the community estate for so long as he
occupies the property, and until it is assigned or awarded to one of you
by way of settlement or trial. If this goes on for 2 years, the total
amount would be $8,400. $8,400 would go on his side of the
marital balance sheet, with the net consequence that he would owe you an equalization payment
of one half that sum.
This is called a
Watts charge (reimbursement to the community).
Marriage of Watts (1985) 171 Cal.App.3d 366. The
Watts concept is not limited to residences, but is most commonly applied to
that context. Indeed, the facts of that case involved both a family residence
and a medical pracdtice which the husband exclusively controlled between
the date of separation and the date of trial.
Watts is really an extension of the reasoning contained in
Marriage of Epstein (1979) 24 Cal.3d 76 [dealing with reimbursements for payments made after
separation, with separate property earnings, towards community obligations
that were incurred prior to separation]. I've written extensively
about both concepts, and invite your to use our onboard search engine
and read those articles if they are relevant to your situation.
The reverse situation would be if the FRV was $1,100 but the mortgage was
$1,500. Then there would be a net loss of $400/month. Your husband could
claim he is preserving a community asset (if there was substantial equity)
and therefore that the community should underwrite some of the payments.
In that situation over the course of 2 years the shortfall would amount
to $9,600. A negative $9,600 would be placed on his side of the marital
balance sheet, with the consequence that the community would underwrite
a portion of the cost to maintain the asset.
This is called a
Watts credit (reimbursement to husband).
These remedies are discretionary with the Court, and are not guaranteed.
Outcomes tend to be fact-specific. Some judges disfavor
Watts claims; others apply the concepts so long as competent evidence establishes
the numbers you think should be used. A lot may depend on how signficant
the under or overpayment is, over time.
In my experience, the bigger the numbers the more likely that the Court
will apply the principles because the "out" party may suffer
a more credible financial injury or, conversely, the fact that one spouse
has overpaid to maintain the residence for the common good (i.e., to avoid
foreclosure and a resulting loss of equity) may likewise be more deserving
Keep in mind that this discussion assumes a jointly titled asset that is
entirely community property. If instead, as occurred on a case I just
settled, the house belongs entirely to the party who occupies it then
they owe nothing. If the house belongs to the party who doesn't occupy
it, then it doesn't get divided on a marital balance sheet (unless
the number is doubled) because 100% of the reimbursement belongs to the
owner, not half.
Also, it is not uncommon with jointly titled interests that the equity
percentages aren't equal, where for example the residence was originally
owned by one spouse but later transmuted into both names during the marriage
so that one party effectively owns 75%. In those situations I'd propose
to a judge that a ratio be used, although it is possible that the Court
will still split the numbers based upon record title alone. Court have
considerable discretion to eyeball a fair result.
T. W. Arnold, III