Rental Properties and Divorce

The division of rental properties in divorce is handled like any other asset; the court determines whether the property is a personal or marital asset and divides marital assets equitably. However, it is important that you have a legal team that can protect your personal assets and your share of marital assets by providing powerful testimony and evidence and by rigorously defending your rights. The attorneys of Karen Ann Ulmer, P.C. are experts in protecting the rights of our clients with regard to the division of real estate in divorce. Contact us today to protect your assets.

Determining ownership

In Pennsylvania and New Jersey, the first factor in determining rental property ownership is whether it was purchased before or after the marriage. But that is not the only factor. Additional factors include whether the rental property was maintained by one spouse or both; whether financial transactions for rental payments, utilities, and repairs were handled by one spouse or both; and whether the property income was used for personal or marital purposes. In essence, was the property kept as a separate entity, cared for and paid for by the spouse who owned the property before the marriage, and were profits kept separate, or were responsibilities and profits from the rental shared?

Consider this scenario. A husband owns a rental property before he is married. He keeps the books, pays the bills, receives the rental payments, and interacts with the tenants throughout the marriage. He has a separate bank account in which he deposits payments and uses that money to pay all bills associated with the rental property. He keeps the money separate from family accounts and does not use it for family needs, such as home repairs or household bills. In this scenario, the husband has clearly kept his rental property 100% separate, and, therefore, the court will likely award the asset and its full value to the husband.

But things can get complicated. What if, in this scenario, the husband’s time in caring for the rental property is significant and the wife is left with an unequal burden to care for the marital home, their children, or his aging parents, because he is not available? In this situation, the court may award her some compensation for her time and work.

Further, what if his wife handled all the finances and interaction with the tenants, utility companies, and contractors? What if family funds were used to pay for major repairs? What if the rental payments were considered part of the family income? And what if the family used the rental for occasional vacations? In any of these scenarios, the court may recognize all or a portion of the rental property as marital property.

The same factors can be considered for a property purchased during the marriage. How much of the care, upkeep, and expense was taken care of by one spouse or the other? These factors will determine the equitable division of a property that is clearly marital property but whose care and upkeep was not equally shared by the spouses.

Protecting your equity in the asset

It is clear from these scenarios that how much you are able to walk away with in the final divorce judgment depends heavily on the quality of your legal representation. At Karen Ann Ulmer, P.C., we rigorously research documentation and any other evidence you have to ensure that you receive what you rightly deserve for your participation in the care and maintenance of the property. In some cases, when there are several rental properties, we can recommend a division of the properties between spouses that is agreeable to both of you.

There are even instances when a divorcing couple wishes to retain joint ownership of the property. In this case, it often works very well to have a third party manage the property, while each of you would receive your portion of the property’s net profit. We could guide you in establishing this third-party relationship as we represent you in your divorce.