When One Spouse Sells the Family Home During a Divorce

Thinking about selling your home during a divorce in California? Whether you are filing for divorce or you just received the filed paperwork requesting a divorce, it is of the utmost importance to carefully review a crucial document contained in that paperwork:

The Summons

In the Summons are key restraints that apply to both parties of a divorce case; among those restraints is a specific property restraint that prevents the parties from doing any of the following:

“Transferring, encumbering, hypothecating, concealing, or in any way disposing of, any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual court of business or for the necessities of life…”

In other words, neither party may, for example, drain bank accounts or cash out retirement funds, sell assets like cars or furniture, sell the family home, close accounts or remove the other spouse’s access to accounts, and more. These property restraints are known as Automatic Temporary Restraining Orders (“ATROs”) and they go into effect upon filing the petition and issuance of the summons (as to the petitioner) and upon personal service of the Petition and Summons (as to the respondent) on the respondent (or upon waiver and acceptance of service by the respondent). These ATROs remain in effect until the final judgment is entered in your case or the petition is dismissed.

Note that the ATROs apply to all forms of property, both real property and personal property, whether community property (earned or acquired during marriage, quasi-community property (earned or acquired during marriage but in a different state), or separate property (earned or acquired before the date of marriage, after date of separation, or via gift, bequest, devise, or descent).

Now, suppose a party to a divorce case wishes to sell the family home during the divorce process. If the parties were to actually abide by the ATROs contained in the Summons, then they would either stipulate and agree in writing to a sale or the desiring party would obtain a court order, just as the ATROs prescribe.

However, that is not always the case. Beyond the words on the Summons, nothing is physically stopping a spouse from engaging in the prohibited behavior of selling the family home.

Remedies for a Home Sale in Violation of the ATROs

So, what should the non-selling party do if they discover that their spouse has listed the family home for sale or has outright sold the home altogether? Houses can often sell quickly, so if you know or suspect your spouse is attempting to sell the family home, it is crucial to act quickly by seeking the advice of an experienced family law attorney on what the next best course of action is.

It could be a cease-and-desist letter to the party in violation of the ATROs. It could be a phone call to the real estate agent the selling party has engaged so that the non-selling party can clearly state their opposition to the home sale. It could be an emergency motion to order the cessation of the home sale process.

If escrow has officially closed on the home sale, then the next step may be to file an emergency motion to request the Court order that the home sale proceeds be placed into a trust account for safekeepingsafe keeping and to prevent the selling party from disposing of or spending those funds.

A secondary remedy may be for the non-selling party to request the Court order the selling party to pay for the attorney fees and costs exhausted in having to file these motions in the first place. The attorney fees order would come in the form of a sanction intended to punish the selling party.

Who Should Get the House in a Divorce?How to Properly Dispose of a Family Home in Divorce

There are several options available to divorcing couples who own real property. The first is to simply list the home for sale, where it will remain until sale, and then divide the net sale proceeds. Oftentimes, one party to the divorce may have a reimbursement interest for separate property funds he or she placed towards the home’s down payment, monthly mortgage payments, or home improvements.

Absent any reimbursement claim, the net sale proceeds are typically divided evenly between the parties. Again, the parties must have either a signed written agreement effectuating the home sale or a court order to sell. In a signed agreement, it is prudent to include additional provisions such as how to address home expenses during the sale pendency, necessary or recommended home repairs, realtor choice, etc.

Another option is the “buyout” method. If one party wishes to remain living in the home after the divorce is finalized, he or she must equalize the other party’s community interest in the home by paying them half of the net equity in the home (plus or minus any reimbursement claims either party may have). In this instance, it is important for the spouse who will not live in the home to remove his or her name from the mortgage, which can be accomplished by home refinance.

What if the parties agree to sell the home in theory, but do not wish to do it anytime soon? This is a common scenario when the parties have minor children for whom support is authorized and the parties wish to minimize the adverse impact that divorce can have on the children’s welfare.

In this instance, the parties can agree on—or one party can request from the Court—a deferred sale of home order. This order will temporarily delay the sale and award temporary exclusive use and possession of the family home to the parent who wishes to stay in the home for the benefit of the children. That parent may have either sole or joint custody of the children.

Consult an Expert at Cage & Miles to Discuss Your Concerns

Overall, during divorce, it is important to carefully monitor all assets to ensure the other party is not engaging in conduct that violates the ATROs. Unless the Court makes an order or the parties mutually agree in writing, real property must never be sold before the divorce is finalized. If you have questions about your community or separate assets, schedule an appointment with an experienced attorney at Cage & Miles, LLP.