Marriage and the fall out of divorce always have significant impact on real estate investment. When a marriage ends up in divorce if the two parties are very reasonable and they have issues related to real estate investment they could be easily solved.
However, due to the heightened emotional state in such situations, the parties are rarely reasonable or accommodating especially when children, money and properties are involved. The issues that are connected in these regards do not lend themselves to easy solutions. An understanding of the issues and how to prevent or manage them is one of the most significant things that a real estate investor should consider.
When it comes to determining the issue of ownership of a property the pre-marriage era of an individual is often easier to manage. During this period, the properties are bought and the real estate developed in the name of the individual. The usual scenario is that the funds are provided or borrowed by the person. These properties could be referred to as pre-marital assets. Except these properties are specifically sold or transferred to another person, the properties belong to that spouse. In case there is a divorce later, these properties are not considered as marital assets.
The complication often occurs when a couple buy properties in the name of one of them but the financial contribution to the purchase and the development of the property are done jointly. This is due often to the state of love and unity that the relationship is experiencing at that time. In situations like this, couples do not keep record of who paid for what and whose money was used to purchase something. Thus when there is divorce it is difficult for the party whose names are not on the documents but who actually contributed to the purchase to claim that they jointly own the property.
Another incident that often brings these issues to the fore in another way is death of either party.
In many parts of Africa where there is a strong tendency to attribute all properties acquired by a family to the man, it is important that couples should protect themselves by ensuring that the interest of their spouses are documented and also mentioned in the Will. Death puts an end to the marital relationship but leaves very little acrimony. On the other hand, divorce often ends the marriage with parties rarely settling their differences peacefully.
There are a couple of scenarios that could occur when couples divorce and are co-owners of an investment property. In some instances, one of the parties might be interested in keeping the property for themselves. The usual solution is for the interested party to buy out the interest of the other party. The process could involve writing a letter of offer, property valuation, negotiation and once terms are agreed, signing of the appropriate documents follows.
However, where both parties are eager to keep the property, the solution available is litigation. Depending on the documentation, the property might be sold and the proceeds shared between the two parties equally or based on the percentage of their individual contributions.
There are a couple of solutions to avoid some of these complexities. In the Western world where the legal system essentially favours and protects the interests of the more vulnerable such as women and children, some have lost years of investment in real estate and money as a fall out of divorce settlements. In order to avoid such a situation, some investors require their would-be spouse to sign a pre-nuptial agreement with them. The effect of such agreement is to prevent in its entirety the spouse from unduly or unjustly benefitting from any asset that they have acquired before the marriage and to limit their liability in case there is a divorce in the future.
While this might sound radical and drastic for some, there are simpler but legal methods that accomplish a similar result. When properties are purchased, couples should ensure that their full names are clearly stated independently on the title documents. Every document that relates to their jointly owned real estate should state their names respectively. It is also a possibility that if any of the couple is not comfortable with this arrangement, they should invest in real estate separately and should have the relevant documents in their names. Protecting and ensuring that your interest is recognised by others is a basic element of making money in real estate.
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