Alameda, CA asked in Divorce and Family Law for California

Q: What is the date used to calculate the home equity? Date of separation (September 2021) or at present time.

Since separation, I have diligently continued to pay the mortgage on the property, significantly reducing the balance owed. However, during recent discussions on asset division, I noticed that the house equity was calculated based on the latest balance, which differs by over $80,000 compared to the balance at the time of separation.

I have two main questions:

1. Reimbursement for Mortgage Payments: Despite my ongoing contributions to the mortgage, I am not entitled to reimbursement for these payments due to my continued residence in the house. I’m curious to know whether this is standard practice.

2. Accuracy of Equity Calculation: Given the significant difference in the mortgage balance between the date of separation and the present, I’m concerned about the accuracy of the house equity calculation. Can anyone advise on whether the balance at the time of separation should have been used in this calculation?

I would greatly appreciate any insights, advice on this matter.


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2 Lawyer Answers
James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Sacramento, CA
  • Licensed in California

A: Under California law, the date used to calculate home equity for the purposes of asset division in a divorce generally is the date of separation. However, if there have been significant changes in the property's value or mortgage balance since that date, this can complicate matters. The courts consider various factors, including how the mortgage payments were made and the use of the property during this time.

Regarding reimbursement for mortgage payments, if you have been living in the house and making payments post-separation, it's common for the court to consider this when dividing assets. However, if these payments significantly reduced the principal of the mortgage, thus increasing equity, you might argue that you should be credited for this increase in value, though this is subject to judicial discretion.

For the accuracy of equity calculation, it generally should reflect the mortgage balance and property value at the time of separation. However, contributions made after separation that affect the property’s equity could be relevant. If there's a substantial difference due to payments made after separation, this should be addressed in the asset division process. It's advisable to present this issue in court or in negotiations with your ex-partner, as equity calculations can significantly impact the division of assets.

Robert Martin Daniels
Robert Martin Daniels
  • Escondido, CA
  • Licensed in California

A: Unless the court grants a motion to value the house at a different date, the court will take values and encumbrances as of the date of trial (or as close as possible). However, if you've paid down a community debt using your separate property (typically your paycheck after your separate), then the court has discretion to reimburse you under In re Marriage of Epstein (1979) 24 Cal. 3d 76. There are referred to as Epstein credits. Now watch out: if you've simultaneously lived at the house since you separated, the other party may claim reimbursement for the fair market rental value of the house under In re Marriage of Watts (1985) 171 Cal. App. 3d 366. These are called Watts credits. Frequently, but not always, the Epsteins cancel out the Watts. Here's an example:

Husband and Wife own a home worth $1 million. Mortgage is $5k/month. If you put it up for rent, it'd fetch about the same: $5k a month. Husband moves out and Wife stays and pays the mortgage for two years until the case gets to trial. She tells the judge, "I paid $120k in community debt and reduced our principal by $35k. Reimburse me, judge!" Husband will reply, "Well, I had to rent a crummy apartment for about the same. Had Wife moved out, we could have had a tenant all this time paying us rent. Why should I have to pay rent AND half the mortgage? Reimburse ME!"

Point is, even though you paid down the mortgage, you may have also enjoyed the benefit of living there. Final thought: Epsteins and Watts are "equitable" remedies, meaning the court has discretion to do what's equitable. Make sure you present facts to show why your position is fair and equitable. Maybe your 6 kids were living at the house and he didn't pay any child support. Judges like facts more than arguments.

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