Thursday, April 24, 2014

Divorce - A House Divided

In a Pennsylvania divorce, the courts use what is known as an equitable distribution model to split marital property.  The equitable distribution model seeks to equitably distribute, rather than evenly distribute, the joint assets and debts acquired throughout the duration of a marriage.  More specifically, equitable distribution covers the time frame from the date of marriage until the date of separation.  The date of separation is the date when the parties are living apart or the finances have become separate, in short, when the parties no longer hold themselves out as husband and wife.  The “date of separation” relates most importantly to equitable distribution, and also starts certain timelines for when a couple can be divorced in a no-fault divorce, but it has no meaning other than that.  Often times we receive phone calls from prospective clients inquiring as to a “legal separation”;  to be clear, that term has little meaning in Pennsylvania.

In the majority of divorces the marital residence is one of the biggest assets.  It is also typical that the parties purchased the house during the marriage and have both names on the mortgage and deed.  Divorce clients frequently first ask “who will get to keep the house?” followed closely by “how do I get my spouse out of the house?”  The latter question is easier to answer.
In Pennsylvania, there are two legal avenues by which a divorcing party can forcibly remove his or her spouse from the marital residence.  The first is a Protection from Abuse (PFA) petition.  To be successful in this route, the petitioning spouse must show that he or she has reasonable fear of imminent bodily harm.  A PFA Order evicts the offending spouse from the house.  The primary function of a PFA is for safety, a PFA should not be utilized for the sole purpose of evicting one spouse from the house.

The second way in which to remove a party from the marital residence is a Petition for Exclusive Possession.  In order to have success, the petitioning spouse must demonstrate that other spouse is not contributing to the household and  in fact that the spouse is creating an intolerable living environment.  The threshold burden is considerable, as the court will be very hesitant to put one spouse out on the street.  In most cases, not surprisingly, the parties are simply unhappy living in the same house with a deteriorating marriage and there is no legal cause to support eviction from the house.  This leads back to the first question set forth above, “who will get to keep the house?”
In the beginning of the divorce prior to litigation, ideally the answer should be decided upon between the parties.  Of course, if the parties cannot agree, then a Judge will ultimately decide for them.  Deciding whether to retain the house is a complicated decision.  There are many reasons why a client would want to retain the house, foremost of which is usually children.  It is usually the primary caregiver who wants the house so that he or she can reside with the children in a house to which they are accustomed.  Of course, today custody arrangements might easily be 50/50,  and often both parents are employed on a full time basis.  Deciding who is the primary caregiver may not be so simple.  Depending on the age of the children, their preference as to where and with whom to live may play a role.

Regardless of whether there are children to consider, another significant factor is the parties’ finances.  A budget which outlines the income and expenses of each party, including the expenses of maintaining the household, is helpful.  If a party wants to retain the house, then he or she has to be able to afford it.  Not only does the person keeping the house have to be able to afford the monthly expenses, but also it is likely that the other party will insist that the party keeping the house refinance the mortgage into his or her own name.
The valuation of the house, especially in today’s real estate market, is another potential sticking point.  Often experts will be needs to give opinions as to the home’s value.  It makes sense to have a list of a few local appraisers and let the parties or their attorneys select one.  Another alternative is for each party to hire an appraiser and agree to the average of the values found by the appraisers.  The next step is to meet with a lender to determine eligibility for re-finance.  Should the re-finance be approved, the final step is to “buy-out” the party who will be vacating the house.  If neither party qualifies for a re-finance in their name alone sometimes the parties agree that both names will remain on the mortgage and deed so that the children can complete high school while one spouse vacates.  There are legal safeguards which should be put in place to protect each party, to ensure that the mortgage continues to be paid and the house does not fall into disrepair.

Another alternative is to sell the house.  The parties should ideally agree on a real estate and the asking price.  Upon the sale of house, the profits would be equitably (but not necessarily evenly) divided. 
Decisions about what to do with the house in a divorce can be difficult and emotionally charged.  Regardless of which decision is made, it is important to thoroughly understand the financial and legal implications.  In time, you might realize that home is where the heart is, and not inside a particular house.

Kristen Doleva-Lecher, Esquire is an attorney in the law firm of Wolf, Baldwin and Associates, P.C..  She practices primarily out of the Reading office; the firm has additional offices in Pottstown and West Chester.  She is a certified mediator and practices in the area of family law.  She may be reached by telephone at 610-374-2400 or by e-mail to kdoleva@wolfbaldwin.com.

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