And they were happy… until they weren’t. Marriages, unions and cohabitations are not always fairy tales. When there is a mortgage involved, that separation becomes complicated, because you have to define what happens to the home or who has paid this amount or that amount if you seek to claim. The solution is to try to make things clear from the first moment so that if everything goes wrong you don’t suffer too much.
When financing the purchase of an apartment there are two main documents: the property deed and the mortgage contract. Where it is easier to make things clear about who owns what part of the home it is in the first place. This is what Arantxa Goenaga, lawyer and partner of the Círculo Legal Barcelona firm, states. “The ideal is that it be specified in the writing. If you own 65% of the property, you will normally take charge of 65%,” she exemplifies.
But between the ideal and reality things are different. “It finds you everything. Couples who are 50/50 in the deed and only one pays, who go half way but only one has contributed the down payment, calculations based on the initial capital…”, she reviews. As long as everything is going well it is not worrying, but if the idyll is broken and problems appear it is. “For example, if only one person has been paying the mortgage but it is specified that 50% is paid, it can be interpreted as a loan or donation to the other,” she warns.
“If it is not paid in half, internal accounting should be kept,” so that if the time comes to render accounts, everything could be computed and clear, says José Alberto Marín, dean of the Notarial College of Catalonia. It is something unusual, because “generally all this is neglected.” “In practice, no one does it. They are not thinking that things could end badly,” he insists.
When there is a divorce and the contributions have been different or not specified, it will be necessary to demonstrate how much each person has contributed or that more has been paid. “What usually happens is that the other person can deny it,” warns Goenaga. This is where the testing factor comes into play. For example, what happens if a person who was not included in the deed or mortgage has been paying on behalf of the person who is the owner and there is separation? What you have paid in the name of the other can be interpreted as a donation and the amount is lost… “It will have to be proven that it was not a donation and it was really a loan that was being made, and that the other has to return it.” You have to foresee any scenario and have proof of payment. “If he cannot prove it, he will not be able to claim it.” In this case, receipts from the bank or samples of contributions may be sent to a shared account from which the monthly loan installment is paid.
To avoid that you have to get ahead. It is recommended to make a private document, signed by both and with the possibility of leaving it recorded before a notary, where when formalizing the mortgage the percentages, the installments to be paid, what part each person pays and the initial capital contributed are stipulated. A key piece of advice but not common, it is recognized. “There are more diligent couples who do it, with a copy for each one, to record how much was contributed upfront or who paid the expenses,” the lawyer specifies.
Thus, complicating a divorce, something already traumatic in itself, can be avoided if one prepares. “When there is an unequal contribution, we recommend signing a regulatory agreement, where each person’s contribution is reflected and signed. It is rarely done…” Marín acknowledges. Yes, it may be more common among high-net-worth individuals, he specifies. It is a document that serves as support or evidence if disputes arise.
Marín provides another solution. The problem is that he has a bad reputation and the name is scary: a “pact in anticipation of marriage breakdown.” A document that specifies what happens to the home if the union is broken, also making the amounts clear. But signing something about divorce when you just bought a house doesn’t mean much, everything is happiness. “They have little legal tradition in Spain, they have only recently joined. It does not have as much roots as a will,” explains Marín. But neither the will implies dying, nor the pact a separation, he compares.
“Both at the beginning when applying for the mortgage and later, the more documented everything is, the better. Then we are going to avoid problems of interpretation,” summarizes Ignacio Marsal, lawyer at MCIA Advocats i Assessors specialized in family law.
Thus, not signing a document that clarifies the payments and percentages, or another document that establishes what happens in the event of divorce, is the big mistake. Not leaving things clear complicates…
Once the divorce has been decided, if nothing was set, the couple will have to see what happens to the assets. The most recommended solution is to dialogue, reach agreements and capture everything in a regulatory agreement. “It is the fastest procedure and at the lowest cost” in addition to being able to collect more things, MCIA proposes in contrast to the judicial decision. Because if there is no way to reach an agreement, the thing ends up before a judge, who defines the move.
“We always try to reach an agreement, a solution that comes out of them, more peaceful,” says Marín. He advises making big numbers, not going into too much detail. “Big numbers” of what has been contributed from each side. Generally, agreement is the most common option: “It is achieved in a very high percentage, there are not so many contentious divorces,” he explains.
Everyone agrees that agreeing to sell the home may be the easiest solution. With the money you can adjust the payments that each other has made. And get rid of an asset that includes two people. “Common assets are usually the most common reasons for disagreement in separation. That is why we always recommend the dissolution of the condominium, not having any shared assets to avoid more problems,” says Marsal. “The best thing is to dissolve the asset, sell and with the money pay off what each person has paid for the mortgage,” she insists.
If only one ends up keeping the property, he or she has to take care of removing the other from the mortgage, “compensating the other party” and taking charge of what remains of the loan, removing it from the contract, the lawyer highlights. Normally, whoever has contributed more would keep it, as the payment of the difference is smaller.
When evaluating the sale, the market situation must also be taken into account. If it was bought in the middle of the bubble boom, perhaps today the loan cannot still be recovered with what the buyer pays.
