Real Estate Division Alternatives in Divorce

California courts utilize a number of methods in dealing with the division and distribution of different types of marital community property. As applied to real estate in divorce, the family court often orders its sale with the community property proceeds divided between the parties. However, there are alternatives to the sale of real property in divorce. In this article, we take a look at some alternative methods used in the division of community real property.

Stipulation

First of all, the parties are free to come to an agreement on how to divide the marital property between them. This is considered an alternative method to property division other than by judicial decision.

If there are no challenges to the validity of such an alternative agreement, the court’s only role is to accept the stipulation and to incorporate it into the judgment.

The nature of such stipulation by the parties can vary, but there are some commonly accepted methods for alternative division other than by judicial decision, which may include:

• Trade-off;
• One values, the other chooses;
• You take it or I will take it;
• Appraisal and alternate selection;
• Sale; or
• Piece of cake division

These alternative “valuation and division” methods, however, are only considered by a court if both parties stipulate to such an alternative method.

Awarding a single asset to a party

In the event the property is not subject to division without impairment, a court may award the asset to one party under such conditions that ensure that an equal division of the community estate is achieved. This is true for community assets such as real property.

The award of real property may be based on factors such as whether:

• the real property is a family residence currently used by the party who is the custodial parent of the children, or
• one party is shown to have a special attachment to the property

If real property is awarded to a single party, however, and in order to maintain the equitable division of community assets, the other party must be compensated in some manner from other assets. What is “sufficient compensation” would be determined from the valuation of the assets.

If there is no other sufficient asset, then the other party may be awarded a note from the other party, and the note would be valued based on its present market value. In some instances, instead of a note, the sale of the family home may be deferred and sold at a later date. In the meantime, it is possible for the property regime to be converted from a community property to a tenancy in common.

Conversion to a Tenancy in Common

A court may order the conversion of a real property which is part of a community regime to a different type of co-ownership, such as a tenancy in common.

Under a tenancy in common, both parties are joint owners of the real property, and each has a distinct and separable interest in the property which they can sell, assign or transfer to a third party. This separable interest forms part of their individual estates, and upon their death, each party can leave their share to the property to their selected beneficiary.

It must be noted that while a court can order the conversion of a real property held as a community asset into a tenancy in common, the court cannot, however, order a joint tenancy between the parties.

This is because a joint tenancy arrangement involves a right to survivorship, which means that upon the death of one party, their share automatically passes to the surviving joint tenant. This defeats the very purpose of dividing community property, and so a court cannot impose a joint tenancy upon the parties when what they are seeking is a court-ordered division of marital assets.