Property in divorce cases

When a marriage ends in divorce, decisions often need to be made about how the jointly owned property will be used in the future. This article explains why it's best for both partners to make joint decisions and what options exist for using the property.

In Germany, approximately 160,000 marriages end in divorce each year, according to the Federal Statistical Office. Almost all married couples own a house or apartment. Reaching an agreement about what happens to the property after a separation is often difficult because the relationship is broken. Despite the separation, the still-spouses should try to work together. Ultimately, the use of the property often also concerns the well-being of their children and avoiding financial losses.

The most common scenario is the sale of the property. The proceeds are then divided between both ex-partners. "This solution is usually unavoidable because neither can take on the outstanding mortgage alone," says Harry Mohr, owner of RE/MAX Immobilien Kontor in Saarlouis, who frequently handles properties involved in divorces and has considerable expertise in this area. It's crucial that the couple seeks expert advice and a property valuation before selling. Ultimately, the proceeds from the sale often serve as the financial foundation for a fresh start for both partners.

If the mortgage is largely paid off and both owners have high incomes, one partner might be able to take over the property alone, remain living there with the children, and buy out the other. In this case, however, the financing bank must agree, because the loan agreements need to be adjusted since one person is withdrawing from the contract.

Transferring the house to the children as a preliminary inheritance or gift

There is also the option of keeping the property within the family despite a divorce by transferring it to the children – through a life estate or gift. For example, the mother could continue living in the property with the children. As their legal guardian, she can dispose of the house until they turn 18. However, this alternative is more suitable for couples with only one child. With siblings, disputes could arise later. "Furthermore, the two owners can agree to keep the property and rent it out," says Harry Mohr. The rental income would be split. Both must be aware that they will have a unified voice when dealing with their tenants and must make joint decisions regarding tenant selection, maintenance, and so on. It is also conceivable that the property remains jointly owned, even after the divorce. One of them could continue living there (possibly with the children) and pay rent to the other partner.

Real estate division: Turning one house into two separate apartments

"It's less common for both partners to keep the house, divide it into two apartments, and move in," reports real estate consultant Max Makler . Both living areas must have separate entrances and be self-contained. This so-called physical division must be formalized by a notarized declaration of division recorded in the land register, and an architect must be consulted beforehand to make the necessary structural changes and draw up new floor plans.

“If both parties cannot reach an agreement, the only remaining option is a partition auction. This carries the risk of yielding a lower price than a regular sale. One of the partners must apply to the relevant local court for the auction of the property,” explains lawyer Andre Wrede, who specializes in real estate and divorce law.

In addition to the advice already mentioned, tax aspects must also be considered when dealing with real estate in a divorce: Depending on the type of transfer, real estate transfer tax may apply, which can vary from state to state but averages around five percent of the property purchase price. Therefore, experts such as tax advisors and real estate agents should be consulted when making this important decision regarding the future use of the property.

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