One method for distributing the marital residence when parties go through divorce involves one party remaining in the marital home while the other party moves out. After parties decide who will stay and who will go, the parties must work out the financial and legal aspects of the transition. Typically, a settlement of this nature will involve numerous key components, including provisions related to how and when any equity in the house will be valued and divided, how and when the title will be transferred, how and when the property will be refinanced if necessary to remove the moving spouse’s name from the mortgage, and how liabilities related to the house will be handled moving forward (oftentimes through an indemnification clause in which the party remaining in the home indemnifies the moving party). We regularly draft these types of provisions as part of separation agreements, which may be used in lieu of litigation when parties are able to negotiate a reasonable settlement.
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A claim for equitable distribution must be brought prior to divorce being granted. If you are divorced, do not have an equitable distribution claim pending, and have not resolved the distribution of the marital home through either a separation agreement or equitable distribution order, you still have options to divide the marital home. If the parties are in agreement, a sales agreement/property settlement agreement drafted with potential tax implications in mind can resolve the issue of dividing real estate. If the parties are not in agreement regarding dividing the real estate, North Carolina General Statutes Chapter 46, Articles I and II, provide for the "partition" of real property outside of an equitable distribution proceeding. These statutes can assist those who were married but did not resolve the division of real property prior to divorce (and did not have an equitable distribution claim pending at divorce) as well as those who were never married but own property jointly with one or more other people. A partition action is a special proceeding that must be commenced in the county in which the real property in dispute is located. Courts tend to favor partitions in kind, meaning that all else equal, a court would prefer to divide real estate into equally valued parcels and create a distinct ownership interest for each party in a particular parcel. Partition in kind allows each party to do as they wish with their own parcel of real property (for example, develop the parcel, rent out the parcel, or sell the parcel). However, dividing in kind is not always an option, especially when dealing with residential property. A judge can't very well equally divide a piece of real estate in kind which consists of the parties' marital residence sitting on a small piece of land. When partition in kind is not a sensible option, a court can force a party to buy out another party or may force the sale of the real estate in question in order to facilitate each party receiving his or her share.
Have questions about separation, divorce, and/or property division in Mecklenburg or Cabarrus counties in North Carolina? We can help with all aspects of divorce, including equitable distribution, alimony, child custody, and child support. Our attorneys are available to help with drafting separation agreements, negotiating settlements, and/or litigating any of these divorce related items in amicable or highly contested cases. Our attorneys are also prepared to assist with partition actions. 704-412-1442. We can help.
Written by Bill Hunter, Hunter & Hein, Attorneys at Law, PLLC, updated 8/23/2017
****The following blog written by one of our Charlotte, NC based divorce lawyers is designed to be an overview of three of the most common scenarios we see when spouses divide a marital home upon separation and divorce. The blog was created as a brief summary of what can be complex legal scenarios, and is not meant to provide legal advice. When divorcing, it is important to contact an attorney who is licensed in your particular jurisdiction. Our attorneys are licensed to practice divorce law in the state of North Carolina, and practice primarily in Mecklenburg and Cabarrus counties.
There are two main reasons why dividing the marital home is often one of the most difficult tasks couples face when splitting property upon separation and divorce. First, there is typically an emotional element associated with the marital residence. We develop connections to the homes we live in as a result of the amount of time spent in the home, work put into the home, having raised children in the home, etc. Second, and from a financial perspective, the marital home is often the most valuable asset owned by divorcing parties. Equity in a marital residence may be substantial due to market appreciation over time, large down payments at purchase, making payments over the years towards mortgage balances, or improvements/additions to the home during the course of a marriage. When dividing a home, it is very important that the parties understand whether the home will be considered a marital asset, separate asset, or combination of the two in the eyes of North Carolina divorce law. It is also important to understand how the house is titled and how the mortgage is held. The marital home may be divided by agreement between the parties (a separation agreement or consent order) or through the court process of equitable distribution if the parties are not in agreement. Our divorce lawyers commonly see the following scenarios when divorcing couples divide their marital home:
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1. Equitable Distribution. Equitable distribution is the method North Carolina courts use to distribute property between divorcing spouses. Unfortunately, under NC law, parties do not have standing to bring a claim for equitable distribution while still living together. As such, one party would have to move out of the house, file for equitable distribution, and hope that the court will eventually grant that party possession rights to the marital home. There are many important considerations in these scenarios, including the amount of time involved with an equitable distribution case (which may take many months), possible abandonment claims against the moving party, and the risk that the judge doesn’t agree with awarding the moving party possession of the home. In certain scenarios, a party may be entitled to an interim distribution which can speed up the equitable distribution process for a specified asset or portion of assets at stake.
2. Divorce from Bed and Board. Divorce from bed and board is a fault based action that does not create an actual divorce between the parties but does create a legal separation. As such, the action may be used to sever marital ties and rights between spouses, to create a fault basis for other legal actions such as alimony, and may potentially be used as an ejectment action. It is important to keep it in mind that these actions can be very expensive to pursue, and that a judge does not have to order one spouse to leave as part of a divorce from bed and board order. The viability of using divorce from bed and board as an ejectment action will vary greatly from county to county, so it is important to speak to an attorney familiar with your local rules and judges prior to filing such an action. By way of example, in Mecklenburg County, it is rare that a judge will order one spouse to leave the marital residence in these actions except in extreme scenarios. For more, visit our divorce from bed and board page.
3. Domestic Violence Protective Order. In scenarios in which domestic violence is involved, a judge may award possession of the marital residence on a temporary basis as part of a domestic violence protective order. Such orders are not a permanent solution, as most protective orders expire after 1 year, and any property terms included in a protective order will be overridden by a subsequent equitable distribution order.
4. Miscellaneous. If children are involved, a court may award possession of the house to one party as may be in the bests interests of the minor children or as part of a child support order. Rule 65 of the North Carolina Rules of Civil Procedure also provides a potential avenue for judges to award possession of the marital residence through injunctive relief when a failure to do so may result in irreparable harm.
Given the emotional and financial concerns often associated with the marital home, it is common for both parties to want to remain in the marital residence after ending their relationship. When both parties dig their heels in, it creates a bit of a legal deadlock which can be difficult to break. As such, if the parties cannot reach an agreement, these scenarios typically involve some sort of litigation and may be resolved a few different ways, including:
Sometimes spouses agree to sell the marital residence as part of their divorce settlement. Selling may be appropriate in a number of different scenarios, but may be necessary in situations when neither party wishes to remain in the home or when the parties don’t have another means by which to pay the moving party his or her share of the equity in the marital home. When parties agree to sell the marital home, a number of items must be addressed, including what repairs need to be made to the home, who will be responsible for any necessary repairs, when the home will be listed for sale, how the parties will select a real estate agent, how aggressively the parties will attempt to sell the home, how the parties will accept offers, and whether the parties will reduce the price of the home after certain amounts of time have passed. If the parties are in agreement on terms, a valid separation agreement may be used to address all provisions related to the sale of the marital residence.