Use of the Family Home During Divorce

One of the issues that couples often face during a divorce is who may continue to live in the family residence after the petition for divorce is filed. The resolution of this issue depends, to some extent, on who owns the family home and whether there are minor children of the marriage who are accustomed to living in it.

If the family residence is the separate property of a spouse, the other spouse has no right to ask the court for the use of the home if the couple has no minor children. Presumably, the thinking is that the property interests of the homeowner outweigh the burden placed on the other spouse who must find a new place to live. In contrast, if there are minor children who have considered the property their home, the interests the children have in a stable and familiar environment outweigh the separate property interests of the homeowner parent.

If the family residence is community property or the spouses are joint owners of it, the court may award either spouse its exclusive use. In making the decision, a court may consider the needs of their children, but even a spouse in a childless marriage may ask for the home’s exclusive use. A spouse who has been a homemaker and needs time to find a job may be awarded exclusive use as a way to reduce her costs of living. A judge might award use of a jointly owned family home to the spouse who makes significantly less money than the other for the same reason.

However, regardless of the reasons for awarding one spouse exclusive use of the home, granting one spouse the right to exclusively occupy the former family residence may work an economic hardship on the other spouse.

For example, suppose a wife has inherited a house from her parents. This would make the house her separate property. Suppose further that she and her husband make it their and their minor children’s home. Then her husband sues her for divorce and asks for the home’s exclusive use. While she lived in it with her husband and their children, she benefited economically. She did not have to rent a place to live. If the court awards her husband its exclusive use, she would incur costs to rent a place to live and lose the rental income she could have collected by leasing it to a third person. Under these circumstances, a court may decide that her spouse should pay her the rent she would have received from that third person.

In the next example, suppose a couple buys a home together (either before or during marriage). Then, the wife sues the husband for divorce and asks for its exclusive use. If the court awards her its exclusive use, her husband suffers the same economic losses described above. He must pay rent elsewhere to live and he loses his share of the rental income the two of them could have collected by leasing it to a third person.

Now, suppose there is a mortgage note on the property. Whether it is separate property or is jointly owned or is community property, there are even more economic consequences. If one spouse is awarded exclusive use: (a) the other must pay rent elsewhere to live, (b) the other loses their share of the rental income they could have collected by leasing it to a third person, and (c) the other is obliged to ensure the house note is paid.

Louisiana law addresses these economic losses by giving judges the discretion to require the spouse who has the home’s exclusive use to pay the other spouse “rental for its use and occupancy”. The judge’s award of this rental reimbursement must be made when the judge awards the exclusive use of the home.

Oftentimes, the issue of exclusive use and rental reimbursement is set for hearing the first time divorcing parties go to court. At that first hearing, the parties themselves can provide evidence of who should have exclusive use. However, at that first hearing, most divorcing parties do not have evidence of fair market rental value. The evidence costs money to acquire and takes more time than is available. It usually consists of expert testimony from a leasing agent or historic rental rates, if available, for the property. Because of the difficulty obtaining this evidence on short notice, what usually happens is that the parties agree that one of them will have exclusive use and the issue of rental reimbursement is not resolved.

If there is an agreement as to exclusive use but not as to fair market rental value, can the non-occupying spouse still ask for an award that is retroactive to the date of exclusive use? The answer is “yes,” but there is an important pre-requisite.

To preserve the non-occupying spouse’s right to ask for rental reimbursement, the parties’ agreement to defer the issue of the rental value must be reached at the same time the judge awards the exclusive use. How is this done?

If the parties reach an agreement on exclusive use and the deferment of rental value, their agreement may be read into the record in open court or submitted to the court in writing. The parties’ agreement to defer the determination of an award of fair market rental value should appear as part of the agreement for the exclusive use of the family home. This agreement as to exclusive use and to the deferment of the issue of fair market rental value should then be signed by the Judge.

First, judges look reliable evidence of the home’s fair market value. If all that exists is the parties’ testimony that they think the house would rent for $X, the judge is unlikely to make an award unless one of the parties is a qualified expert in fair market rental values. The amount of a mortgage note is not competent evidence of rental value. The cost to rent a house depends on many factors such as the type of neighborhood, the schools, the condition of the property, and its amenities. The amount a couple borrowed to buy the home and the number of years they financed their purchase (both of which affect the amount of their note) are not relevant to what a third person may pay to rent it.

Second, judges consider the equities of the case. If a spouse is allowed to live in the home but the other spouse pays the note, the judge might require the spouse occupying the residence to pay rent. Otherwise, the spouse paying the note is at a financial disadvantage because he or she not only pays the note but must also pay for his or her own housing.

On the other hand, suppose that a spouse who is sick or disabled or has limited earning capacity is awarded the use of the home. If the other spouse is financially capable of paying the note and rent, then the judge might not award rental value or might award a small amount. The spouse paying the mortgage has a claim for reimbursement against the occupying spouse of one-half of each mortgage payment. A judge could conclude that requiring the occupying spouse to reimburse the non-occupying spouse for one-half of those payments is “rent” enough.

You should ask your divorce lawyer if your spouse has requested the exclusive use of your former family home in his or her pleadings. If the answer is “yes,” talk to your lawyer about whether or not you should seek fair market rental value from the other side if he or she is awarded exclusive use. Ask what kind of proof you will need of its rental value and when you would need to show that proof to the judge. Be prepared to pay for an expert such as an appraiser if you decide to pursue your claim.