Marriages in this modern-day society quite often do not last a lifetime.

A divorce is a painful process, on both the emotional as well the financial front. You have a lot of think about: How to move on, custody of kids if any, alimony, and of course, division of the assets you have created together.

Of all the assets that you bought as a couple, the immovable property will be the one that calls for the most attention. Property is a high-value investment that carries a lot of sentiments and emotions, and also involves a loan with repayments stretching for many years.

 

Establishing your claim on the property

Whenever you buy a property, you can register it either in your name, the spouse’s name, or jointly.  Though determining the ownership seems straightforward, it could be tricky in cases like:

• The property is registered in the wife’s name, but the payment has been made by the husband. This is quite common due to stamp duty benefits.
• The property is registered in the wife’s name and payments have been made equally/unequally by both the spouses.
• Property is registered jointly but payment has been made by one spouse.
• Property is registered jointly, and payments have been made by both equally/unequally.
• These cases require the percentage of ownership to be determined before going ahead with the settlement.

The status of an inherited/ancestral property does not change on divorce. The ownership remains with the person who inherited it.

 

Distribution of home equity

When we consider the first two cases given above, the legal owner of the property is one spouse. But the payment was made by the other spouse. In these kinds of cases, the other spouse has to prove it that the payment towards owning the house has been done in full or part by him/her.

During the good days, couples do not often bother to keep an account of contributions towards down payments or EMIs. Matters get complicated in those cases where the couple cannot decide their shares amicably, or they do not have documents to prove their share of ownership.

Once they decide upon their shares in the property, then they can go ahead with deciding what they do with the property.

 

Options for future course of action

Rent out the property and distribute rent in proportion of ownership

This is a simple solution where the couple decides to rent out the property and distributes the rent in proportion to their ownership. Or one of the spouses may continue to stay there, and the amount is adjusted against alimony payable if any.

One spouse decides to buy out the other’s share

This is another option available to the divorcing couple. Let’s suppose a property was bought for Rs 50 lakhs in the proportion of 30:70. The spouse holding the 70% share can buy out the share of the other spouse by giving him/her the 30% share. Determining the current value of the share is complicated, as real estate appreciates with time.

As co-borrowers of a home loan, both the spouses are equally responsible for timely repayment of EMIs, despite the divorce. The lender does not excuse the spouse who has given up their share of ownership. Therefore, it is better than the existing loan is closed and the spouse retaining ownership of the house goes in for refinancing.

Sell the property and distribute shares in proportion of ownership

This option also involves lesser hassles once the proportion of ownership is clear. The couple can sell the property and distribute the share in pre-decided proportion.