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My Husband Is Living In Our Home - Doesn't He Owe Something For This?

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 this difference.

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 owned asset.

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 of reimbursement.

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

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