No one enters into a marriage believing it will end in divorce but unfortunately, some married couples decide to end their union for a variety of reasons. While California is one of the states in the U.S. with the lowest divorce rate, divorces still occur throughout California, giving rise to many questions about the division of property and other assets during divorce, including questions about dividing rental properties. How are rental properties divided during a divorce in a community property state like California?
California’s Community Property Laws
California is a community property state. When it comes to divorce, community property refers to whatever a couple owns or owes together during the marriage. This is a category that’s distinct from separate property owned by one spouse before the marriage.
Community property is anything earned and accumulated during a marriage, any property purchased with the money earned during the marriage (regardless of which spouse earned the money), and also any debt incurred during the marriage. Some common examples of community property include:
- Properties such as a home, vacation homes, timeshares, and rental properties
- Furniture and appliances
- Luxury items
- Mortgages, credit card debt
In California, the courts divide all community property 50/50 in a divorce if the issue comes before a judge. Property and possessions given to or inherited by one spouse during the marriage and not earned or purchased through earned money are considered separate property rather than community property and remain with the party who received it.
Dividing Rental Property During a Divorce in California
The way a court decides on the division of property in California depends on when a couple acquired the property. Any rental property either spouse owned before the marriage remains their property alone after a divorce even if the other spouse invested time and money into the property. Any rental property purchased during the marriage is community property and subject to a 50/50 division during divorce. The only exception is property excluded from joint ownership in a prenuptial agreement, such as when one party plans on purchasing rental properties and wants to retain full ownership through a signed prenuptial agreement.
There are several ways to handle the division of community property such as rental properties purchased during the marriage:
- Sell any rental properties and split the profits from the sale evenly
- Negotiate trades while mediating a settlement agreement. For instance, if one spouse wants a particular rental property they can offer something of equal value like offering the spouse full ownership of another property.
- Keep all rental properties in both names and continue operating them together. This option only works for couples who remain able to communicate peacefully during and after the divorce.
With these options, many divorcing couples work out a satisfactory agreement on the division of their community property during a divorce rather than leaving the matter up to a judge.
An experienced Los Angeles divorce attorney can help with the division of community assets including rental properties.