Case of divorce?
A marriage does not only connect two partners, but also assets and savings. If spouses divorce or separate, this means an end to their life together – and thus also an end to their joint property. Since not only legal circumstances but also life circumstances have to be taken into account here, some challenges are to be expected. For example, the question arises: What happens to the jointly occupied property?
In the following, we will get to the bottom of this issue and help you answer basic questions about property division in the event of divorce.
Even if a prenuptial agreement does not fit into the concept of love for many, it can save grief, arguments and work in the event of a divorce and create clear conditions. A prenuptial agreement is particularly useful if the spouses’ financial circumstances are very different. It sets out basic points such as property claims, division of assets and the amount of maintenance payments. Since a fair legal protection is guaranteed in case of divorce, disputes over real estate can also be prevented. Without a prenuptial agreement, the separation of assets and property is determined by law in Austria. In this case, the house and flat fall under the so-called personal property, which differs from “non-divisible” personal property due to joint use.
The Matter with the Land Register
In principle, under Austrian law it is always a question of dividing the assets, savings and also debts equally between both spouses in the event of divorce.
Dividing a property fairly often turns out to be complicated, especially if the spouses cannot agree among themselves. The land register entry, assets of the individual parties, but also life circumstances, children, etc. play a role.
If both spouses are entered in the land register, the situation regarding the property is easier to settle. Since both are equal owners of the property, it is easiest in this case to sell the house and divide the profit and, if necessary, first pay off loans, etc. If one of the spouses wants to sell the property, the other spouse can do so. If one of the spouses wants to keep the property, he/she must pay the other spouse compensation (half of the market value of the property).
If only one of the spouses is registered in the land register, then the ownership is in the hands of this registered person. In the case of sole ownership, in many cases the person keeps the house and also remains living in it. However, this is initially irrelevant when it comes to property distribution. Even if the property itself belongs to only one partner according to the land register, the assets of the property must be divided in the event of a divorce. The unregistered spouse is therefore still entitled to a share of the market value of the property.
Who has the right of habitation?
It should also be borne in mind that, despite sole ownership, the right of residence does not always lie with the owner. Depending on the life situation of the spouse (possibly joint children, or no financial security for a flat of his/her own), he/she may be granted the right of residence for the property, even if the property belongs to the other spouse, according to the land register. Each individual case must be considered individually.
Compensation Payment for a Sole Owner
Even though a 50-50 solution is usually sought in the distribution of assets in a divorce, many factors play a role in the equalisation payment of the property. According to the law in Austria, the principle of equity applies. It must always be ensured that the recipient of the settlement can afford a new condominium from the sum. On the other hand, the compensation payment must not threaten the existence of the payer. Therefore, in addition to the value of the property, factors such as the income and financial situation of both parties must also be taken into account.
Children as a factor in equalisation payment and right of residence
Another factor for the equalisation payment and the spouses’ right of residence is children. Austrian law provides that in the case of divorce, the best interests of the child are always taken into account. Thus, in some cases, the decision may be in favour of the custodian, although he/she might have received a lower compensation in the absence of children.
However, not only the equalisation payment, but also the right of use can be distributed differently by the court than the land register provides. Even if, for example, the spouse is the sole owner of a house according to the land register, the spouse can be assigned the urgent right to live in the property if the spouses have children and the distribution of property could impair the best interests of the children. The deterioration of the best interests of the children can be of a financial nature or also factors such as being torn away from familiar surroundings and structure.
Why real estate counselling makes sense in the case of divorce
If the property distribution in a divorce develops into a complicated case, it is highly advisable to seek legal advice.
Legal advice in the case of divorce
A long legal dispute about the property(ies) should be avoided if at all possible. In the worst case, persistent disagreements can lead to a forced sale/partial auction, which usually yields far lower profits and should only be done as a last resort.
Appointing a broker in the event of divorce
In addition to legal advice, a real estate agent should definitely be consulted. This is because before a compensation payment for a property is determined, the current value of the property must first be determined.
For this purpose, it is advisable to have the appraisal carried out by a neutral expert. In order to avoid distrust of a spouse or of the estimated market value, both parties should agree on the selection of a valuer.
Equalisation of gains from a property in the event of divorce
If no prenuptial agreement was drawn up at the time of marriage, the assets (including debts) acquired during the marriage must be divided upon divorce. Joint property can be made or each spouse has his/her own property which he/she manages himself/herself.
In a divorce, all property should be divided fairly. If one of the partners has made more assets than the other in the course of the marriage, this must also be balanced out proportionately in the event of a divorce. Accordingly, the division of assets is referred to as equalisation of gains.
The period on which the equalisation of gains is based is the time between the marriage and the divorce. Unless the domestic partnership was dissolved beforehand. In this case, the date of moving out is the end point.
Real estate is also one of the consumer goods that must be divided in the event of a divorce. In this case, it is initially irrelevant whether there is a sole owner, as the value of the real estate must still be taken into account for the equalisation of gains.
Equalisation of gains and inheritance
However, if one of the spouses has inherited a house in the course of the marriage, this is not included in the equalisation of gains. Only the difference in the increase in value of the property after a subsequent renovation or similar is included in the equalisation.
Equalisation of gains on loans
The general rule in Austria is that the spouse who receives the asset also bears the financing of the loan. However, this is not always so easy to determine. Taking into account the life situation and the points described above, debts must also be divided in the event of divorce.
Other questions often arise, such as: Can I get out of a joint loan? Can I sell the house despite the loan? Can the loan be rewritten after a separation?
FAQs Divorce & Real Estate
Who owns the property after a divorce?
In principle, the property is considered to be “marital property” during the marriage. In most cases, the property will be jointly owned by both spouses. In the event of a divorce, the marital property is usually divided between the spouses. This can be done by agreement or in court, depending on the individual circumstances of the case.
Who has the right to stay in the house in the event of separation/divorce?
As a rule, both partners initially have the right to joint use of the property. However, this can depend on various factors such as the sole ownership of one partner or the welfare of the joint children. If no amicable solution can be found, the court can decide who has the right to remain in the house.
What options do you have with the property in the event of divorce?
In the event of a divorce, there are various options available to the former spouses. One option is to sell the property and divide the proceeds. Or one of the partners can take over the property and pay off the other partner. Another option is to share the property temporarily, for example until the children are of age. In some cases, renting out the property is also considered. The best solution depends on the individual circumstances of the ex-couple.
What happens if one partner does not want to sell the joint property?
If one partner does not want to sell the joint property in the event of separation or divorce, things can get complicated. In such cases, the partner who wishes to sell can apply for a partition auction in order to divide the value of the property. In a partition auction, the property is sold at public auction and the proceeds are then divided up. Alternatively, the partner who remains in the property can pay off their ex-partner and continue to use the property on their own.
What is equalization of gains in the case of divorce property?
The equalization of accrued gains is an important aspect of the division of assets in the context of a divorce. In the case of divorce property, equalization of accrued gains refers to the financial settlement that is made between the spouses in order to fairly distribute the increase in assets achieved during the marriage. If a property was acquired during the marriage and increases in value, this gain is included in the equalization of gains.
What happens to the property if it has not yet been paid off at the time of divorce?
If a property is not fully paid off at the time of divorce, this can lead to a complex situation. As a rule, the remaining loan amount is classified as joint debt and must be divided between the spouses. There are several possible options: One option is to sell the property, using the proceeds to pay off the loan and dividing the remaining amount accordingly. Another option is for one spouse to take over the property and continue to service the loan alone.