Who Gets the Rental Property in a California Divorce?
Across California, families invest in rental real estate properties for income, financial security, and diversification. A recent survey by JP Morgan Chase shows that over 20 million properties throughout the United States are owned and self-managed by “mom-and-pop” investors. If you and your spouse have invested in rental properties during your marriage, this story might sound familiar. However, you might not be so familiar with what happens in the event of a divorce. Who gets these rental properties?
Is the Rental Unit Community Property?
The first question you need to ask yourself is whether the rental unit is “community property” or “separate property.” If one spouse owned the rental unit prior to the marriage, then it is by definition separate property. If the spouses acquired the property during the marriage, then it is almost certainly community property. While community property is divisible in the event of a divorce, separate property is not.
That being said, the net increase in value of the rental property during the marriage may be considered community property. In addition, any income generated by the rental property during the marriage could be divisible. You may need to discuss these factors further alongside a qualified divorce lawyer in California.
Should You Sell the Rental Unit in the Event of a Divorce?
If the rental unit is indeed community property, then both spouses will have an equal stake to the total value of that property. The obvious way to resolve this situation is to sell the rental unit and split the proceeds. However, this may not be a desirable course of action for one or both spouses for a number of reasons.
For starters, the housing market may be experiencing a “dip,” making it financially inadvisable to sell until prices recover. Secondly, spouses may wish to continue receiving rental income in the future. After all, this may prove to be a valuable source of relatively passive income for the next few years – especially after the financial turbulence that a divorce may bring. Finally, a spouse may not wish to evict existing tenants after forming positive relationships with these individuals.
Fortunately, there are various strategies to divide the underlying value of rental properties without selling them. One spouse may “buy out” the other – offering a cash settlement in exchange for sole ownership of the property going forward. Spouses may even wish to co-own the rental unit in the future and divide the rental income. Spouses can create these agreements during mediation, collaborative law, and other alternative dispute processes.
Find a Qualified Property Division Attorney in Riverside County
If you have been searching for an experienced property division attorney in Riverside County, look no further than the RM Law Group. We understand that some assets are much more complex than others during the property division process – and rental property is only one potential example. With the help of property division lawyers at RM Law Group, you can determine the most appropriate way to handle these assets and secure financial stability after your divorce. Reach out today to begin the discussion.
Jason Martinez is a co-founding partner of RM Law Group, LLP. His practice focuses exclusively on California Family Law and community property division, including litigation and settlement of complex and high-conflict divorce and child custody proceedings. Jason understands that divorce and family law issues have long-term effects on all family members, especially the children.
