Following the recent economic crisis throughout the United States and the volatile housing market fluctuations, many couples have opted for or were forced to enter rental agreements. Rental agreements are also known as leaseholds. With home prices often at levels unattainable for couples that may just be starting their professional careers or may have switched careers during their marriage, renting is sometimes a more feasible option for housing than purchasing a house. While renting may help couples stabilize their finances over a period of time until they are able to afford purchasing a house, other couples also rent by choice to avoid the pressures that come with owning real estate properties. In other situations, married couples may own a home and share rental properties on the side for extra income, vacation purposes, or any number of unique reasons.
When these couples make the difficult choice to file for divorce, there are very real questions that arise surrounding their rental properties, whether they be part-time or full-time residences. The tips below are designed to help couples going through a divorce navigate the division of property when renting is involved.
Leased Property as Marital Residence
Whether you own or rent your primary residence, it is considered marital property and a court has the ability to divide such property in a way the judge determines is appropriate. This means that, depending on the circumstances of your individual situation, a judge may end up awarding the lease of a rented property to one spouse or the other, regardless of whose name the lease might be in. It is important to note that a judge cannot cancel a rental agreement. This means that if you are divorcing with a substantial period of time left on a given lease, you need to be prepared to honor that lease according to the terms set forth in the divorce settlement. If you and your spouse are able to agree on who will keep the leased property, the process can be easier and less confusing. It is also important to remember that, in most cases, one spouse will likely need to keep the lease in order to avoid additional court proceedings to determine responsibility for costs related to the rental property.
Keeping your lease during the divorce is essential. Primarily, you will not be responsible for the often excessive costs associated with breaking a lease. Additionally, if you do move out and find your own place while your spouse maintains the previous rental property, you could face the obligation of paying to keep such property for your spouse for the duration of the lease. If you move out but wish to be the one that keeps the property where your spouse resides, courts may be less likely to award such residency to you.
Landlord Issues
Regardless of the judge’s decision as to who should retain the lease, there are instances when a landlord does not have to honor it. For instance, if both you and your spouse’s names are on a particular lease, a landlord might not be obligated to remove the name of the spouse that will no longer be residing at the leased property. In such cases, you may want to speak to your attorney about drafting a clause for the divorce agreement in which the spouse keeping a rental property agrees to assume any financial obligations that arise from the lease even if both names remain on it.
You should be prepared to work out an agreement with your landlord that takes into consideration the court’s determination. One of the best ways to do this is to present a formal agreement between the spouse that will stay in the rental property and the spouse that will no longer reside there. Such agreements should include:
- A transfer of all rights to the rental property to the spouse that will remain in such property, including assigning all related obligations – like utility bills, parking fees, and security deposits – to the spouse that will remain in the residence;
- Specific details about how associated rental rights will be handled, such as who will get the security deposit refund if one is given; and
- Details related to consideration of remarriage or other significant changes in one spouse or the other’s personal situation as it relates to the rental property.
A family law attorney with experience in divorce litigation can help you prepare agreements for both the court and your landlord related to the division of rental properties.
Hold-Harmless Clause
As discussed, when both spouses have their names on a particular lease, a document relieving the spouse no longer residing in the rental property from financial obligations related to it can be extremely effective in resolving issues related to jointly leased property. Such clauses basically allow a landlord to maintain a lease as is should they so desire, and may prevent you from having to sign a new lease with increased rent or other undesirable circumstances. A hold-harmless clause is a tool that states that, while both names remain on the lease, the spouse that will continue to reside in the leased property is responsible for any and all expenses related to that property. Thus, in cases where there are monthly fees for a particular rental property, the spouse that no longer resides at the property would not be responsible for those fees, or for associated utility and other bills, with an effective hold-harmless clause built into the divorce decree and presented to a landlord. Drafting and including a hold-harmless clause provides some security for the spouse that will not be residing at the rental property, and can allow you to maintain exclusive control over that property until the expiration of the lease. This may help your landlord feel more comfortable with the court’s decision, and may also help the spouse no longer residing at the property be more amenable to the change.
Ask Your Attorney
Not all lease agreements are as straightforward as some people might think. There are often small details that can easily be overlooked by individuals who do not have experience in the division of property and do not know exactly what to look for. A family law attorney that has experience in the division of property during divorce can help navigate lease agreements and make the transition of the property to one spouse easier. A family law attorney can help facilitate the transfer of property and memorialize it in the divorce decree. If you are concerned about how a divorce will impact your lease agreement for rental property you share with your spouse, regardless of whether such property is jointly owned or only in one spouse’s name, contact Scott J. Stadler for more information about the possible outcome of such concerns.