Property in a divorce

Who actually owns the house?

The answer is simple and still surprises many people. What counts is who is in the land register (Grundbuch). Marriage alone does not make it joint property. If you married without a prenuptial agreement, you live in a community of accrued gains (Zugewinngemeinschaft), but that only means that the increase in assets is shared at the end. It does not mean that everything belongs to both of you. If only one name is in the land register, the house belongs to that one person. Even if the other has paid the instalments for years.

If both of you are in the land register, usually with one half each, the house belongs to both of you. You can then only sell it together. In theory, each of you can sell your half alone. In practice, hardly anyone wants it, because the buyer would share a house with a stranger.

Two things that are often confused: whoever is in the land register is the owner. Whoever paid the instalments can claim money back for them, but does not automatically become a co-owner. Keeping the two apart means fewer arguments.

Equalisation of accrued gains and the property

Without a prenuptial agreement, the accrued gains are equalised on divorce (Zugewinnausgleich). It works like this: you look at how much each spouse's assets grew during the marriage. The spouse whose assets grew more pays the other spouse half of the difference.

The house enters this calculation at its market value, minus the debts still secured on it. The reference date is the day the divorce petition was served. That is why a sound valuation is not a side issue here. It directly determines how much money you receive or pay.

If one of you brought the house into the marriage or inherited it during the marriage, it does not count in full. Then only the increase in value during the marriage enters the calculation, not the entire value. You have to prove this yourself, though. Dig out the old documents early, not just before going to court.

The four options compared

The joint loan: the most common misconception

The divorce changes nothing about your loan agreement. If both of you signed, both of you still owe the bank the full amount after the divorce, not half each. The bank may choose whom to collect from. It chooses the one who can pay.

Whoever takes over the house must get the bank to release the other from the contract. This is not a formality. The bank checks whether the remaining borrower can manage the loan alone and only says yes if income and Schufa credit rating are sufficient. This is exactly where such arrangements fall apart all the time, weeks after the handshake at the kitchen table.

If you sell and repay the loan early, the bank often wants compensation. It is called an early repayment charge (Vorfälligkeitsentschädigung) and makes up for the interest the bank loses. If your fixed interest rate still has a long time to run, this can be a lot of money. There are exceptions, for example ten years after you received the full loan amount. Ask the bank to state the amount in writing before you decide.

Compensation for use: whoever stays may have to pay

If one partner moves out and the other stays in the house with the children, the one who moved out can demand money for this. It is called compensation for use (Nutzungsentschädigung). The benchmark is the rent the house would fetch locally, reduced by the share that already belongs to the one who stays.

It is usually offset against maintenance. Living rent-free saves money, and this benefit counts towards maintenance. The calculation behind it is tricky. Leave it to a specialist family lawyer.

The tax trap after divorce

Many people only notice this when the tax assessment lands in the letterbox. If one partner hands their half of the house to the other and receives money for it, the tax office treats this as a sale. If the house was bought less than ten years ago and the partner handing it over no longer lives there, tax may be due on the gain.

And now the catch: moving out ends owner-occupation. Anyone who moves out during the separation year and hands over their half two years later may have lost the tax advantage for owner-occupied property. How exactly this works is explained in the article on the ten-year holding period. Your tax adviser will calculate what applies in your case.

There is one piece of good news. If divorced spouses transfer a property to each other as part of dividing their assets, no real estate transfer tax (Grunderwerbsteuer) is due. Very few people know this.

What helps in practice in this situation

Three things make the difference. First, an external valuation that neither of you paid for and that both of you therefore accept. Second, a letter from the bank stating whether it would release one of you from the contract at all. Get this before you discuss a takeover. Third, a timetable. A sale under pressure usually costs more than either of you can wring out of the other in a dispute.

In such cases, we treat both sides equally and send both the same assessment. Otherwise, in the end, people argue about the figure instead of the matter itself.

Sources

• §§ 1363 et seq. BGB (German Civil Code), community of accrued gains and equalisation of accrued gains
• § 1568a BGB (German Civil Code), marital home on divorce
• § 3 no. 5 GrEStG (Real Estate Transfer Tax Act), exemption for the division of assets after divorce
• § 23 EStG (Income Tax Act), private sale transactions
• § 490 para. 2 and § 489 BGB (German Civil Code), termination and early repayment of real estate loans