For many couples who are taking on divorce in the state of Florida, they are finding that they must take on the rental property that they own when they divide their assets in court. By day 45 after filing in Florida, your rental property or properties should be listed on the asset list that you gained while married, even if it is titled to one or the other party. Rental property, however, is a bit different than other assets, and these couples have several options to consider before they make a final decision.
What is considered rental property?
Rental property refers to the property that a couple owns together but rents out to tenants in exchange for a monthly income. When renting a property, this couple is deemed automatically as the landlord of the property. With multiple rental properties, many couples seek out a property manager that they pay to oversee the property, but they are still financially responsible for any repairs or damages as outlined in the rental agreement.
Many couples use these properties as ways to supplement their income for their home. In many ways, it is essentially a family business, even if the income is passive with the use of a property manager. When this couple decides to divorce, these rental properties must be divided like the rest of their assets.
Why is rental property different from other property divisions?
Rental properties are different than other assets because they include outside parties. In most cases, the rental property in question includes a tenant family under contract. Attempting to sell or change the management system could prove to be difficult. Once a divorce is underway in the court system, one of the problems that arise quickly is which party is responsible for covering the expenses on the rental property. If the ownership of the property is still being worked out, each party could look to the other for covering these costs.
Before deciding on how to move forward with the rental property, it is best practice to have the property appraised for its current value. This allows each party to know how much the asset is worth before they move forward in the divorce and can make a decision they are satisfied with once the divorce is finalized.
Get an Appraisal
Before you move forward into your divorce, it is best practice to have an appraisal done on any rental property that you may own. During an appraisal, a third party will come and assess the value of the home. This can give each party insight into the value of the property and will help both parties move forward in deciding how to divide the property.
What to do with the income?
If your rental property is currently under rental contract throughout the divorce, both parties will continue to collect this income until a decision has been made on the property and how it will be divided. For the duration of the divorce, both parties have an option to open a separate account to hold deposit these rent payments until the divorce is over. The money should not be spent until the divorce is over unless the parties agree to use these funds for any repairs or damages at the rental property.
How is rental property divided?
To properly divide the rental property between the two parties, it is best to know all of the options available:
- Asset trade
- Sell the property
- Continue to jointly own property
The first option is to do a clean trade between the parties, with one asset being traded to the other. If one of the parties is passionate about holding on to the property and another is indifferent, this option allows them to split the assets and make a value trade for a peaceful solution.
If the other party does not have an asset of equal value, they can offer to pay half of the rental property value to the other party. This is one of the reasons why having your rental property appraised before the divorce is final is essential. This agreement also finalizes the responsibility portion of the property and leaves the owning party to uphold all responsibilities of the property at that time.
Sell the Property
Another option that both parties have is to agree upon is to sell the property. Once the property has been appraised, the couple will put the property up for sale, and split the proceeds of the home once the sale is complete. Again, having the appraisal completed on the rental property is essential for this purpose. Depending on the condition of the home and any outstanding repairs that need to be made, this could help the couple decide if they want to sell the property or not.
Manage Property Together
Sometimes, the divorcing couple decides that the rental property is much more valuable in its current state to both of them and they want to continue managing the property together. If they have been using these properties as major sources of income for their livelihood, they do have this option. An agreement can be made that benefits both parties financially.
Some couples can continue a business relationship post-marriage and can form a legal agreement between both parties that identifies them as equal owners. The proceeds of the properties can be divided between the two parties. Seek guidance and legal advice from your divorce attorneys before you move forward so that each party is aware of their responsibilities moving forward and what they can expect in return.
Contact us today!
Making this decision to divide rental property during a divorce is not a light decision because it is a different situation than other assets. This decision should be a well-researched decision with the appropriate actions for your protection. At Florida Law Advisers, we seek out all of the options available and strive to help our divorcing clients get their rightful share of the assets they gained as marital property. Contact Florida Law Advisers today to get a consultation and the legal advice you need to move forward with your divorce.