‘And what about the property?’ – many owners have to confront this question when divorcing if they co-own a property. There are several options. Which of these is the best depends on the individual circumstances.
If a property is owned by both former spouses, their joint responsibility does not end with the divorce. Both of them must maintain and finance the property. In many instances, this doesn’t go well. The prospect of a partition auction often looms large. However, this ought to be avoided wherever possible, as it frequently results in financial loss. As a rule, both parties are better advised to consider one of the following options.
Selling the property
If you and your former spouse cannot agree on who gets to keep the property or if you are lacking the means to pay the other owner out, selling up is often the best solution. Not only can the proceeds of the sale be used to pay off the outstanding mortgage; often, there is a little money left over for a fresh start. Before proceeding, however, you should clarify with your bank whether they will demand prepayment compensation for the early repayment of the mortgage. You should also check whether you will have to pay capital gains tax on the proceeds. This is generally not the case if you are living at the property. Before selling up, you should also have your property professionally valued by an expert.
Transferring full ownership to your former spouse
If both ex-spouses can agree on who will retain the property, transfer of ownership can be certified by a notary. The person taking full ownership then pays the other person the agreed price. Here, too, we recommend a professional valuation of the property beforehand. The notary will then request an amendment to the ownership details in the Land Register. However, the issues of alimony payments and compensation for the property’s increase in value should be clarified beforehand; otherwise, both parties can suffer financial disadvantages.
The person transferring their share of ownership receives a large sum of money, which forms part of the final assets. By contrast, the person assuming full ownership doesn’t have to pay rent, which increases their disposable income, resulting in higher alimony payments. For the transferring party, it is also important to be released from any liability for repayment of the mortgage. Without written confirmation from the bank, the formal agreement cannot be notarised.
Another solution, albeit one that is infrequently implemented, is a physical partition of the property. This involves converting the property into two separate residential units. A prerequisite to this, however, is that the property is suitable for such a conversion in the first place. Following the conversion, the property is divided up in accordance with the respective homeowners’ association (WEG). The former spouses can thus live in their unit within the property, or sell or let it.
Still not sure what the best solution is for your situation? Get in touch with us! We are happy to advise you.
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In this text, the generic masculine is used for better readability. Feminine and other gender identities are explicitly included to the extent necessary for the statement.
Disclaimer: This article does not constitute tax or legal advice in individual cases. Please consult a solicitor and/or accountant to clarify the circumstances of your specific case.
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