Prospective homeowners rarely consider that over 40 percent of all marriages and well over half of all cohabiting partnerships without a marriage certificate end in separation or divorce. But they should. Whether sole, co- or common ownership is decided upon has a major bearing over who benefits from any sale and who has to move out if need be.
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Created on 23.02.2024
What happens to property when couples separate or divorce
Around 30 percent of all mortgages taken out have to be reorganized due to separation or divorce. Married and cohabiting couples should seek expert advice at an early stage about what happens to their shared property if they separate or divorce. We’ve summed up the key points for you.
Sole ownership: clear-cut situation in the event of separation
The simplest scenario – where one of the couple is the sole owner of the house or apartment – is quickly resolved: the property usually remains in the hands of the partner who owns it. Cohabiting partners with no involvement in the property are well advised to take out a rental agreement governing the rights and obligations of both life partners that is subject to the normal provisions on termination when people sharing a property go their separate ways.
Co- or common ownership: the share of ownership doesn’t have to reflect the actual financing
This is the simplest but far from the most common form of cohabitation in an owned property. If both partners wish to contribute towards payment for the property, a choice must be made between co-ownership and common ownership. In the case of co-ownership, which is the most common option, the apartment or house belongs to both partners based on an agreed share, usually 50 percent each.
Married couples declare the value of their property as an asset in their joint tax return, while cohabiting couples do so based on their share of ownership. This share doesn’t have to reflect the actual financing arrangements: for example, cohabiting partners each owning half of a co-owned property can agree to distribute the mortgage debt 20:80. They then make the debt interest deduction from income tax based on the actual situation.
The drawback of this rule: 50 percent co-ownership still applies in the event of divorce or separation. If the property’s value has risen in the meantime, the party contributing less financially stands to benefit. Conversely, if its value drops, the financially weaker party still has to bear half of the loss. The party contributing more financially benefits from what’s called a nominal value guarantee on part of their investment (the share exceeding 50 percent, which would be 30 percent in this example). They can demand this share in full from the other party.
However, if a couple opts for common ownership, they can agree between themselves the extent to which both partners benefit from or bear any rise or fall in value if the shared household breaks up. This requires the prior set-up of a simple partnership.
Financial protection in the event of death
If one of the spouses or partners dies, this raises the question as to whether the surviving person in the partnership can afford to meet the costs of the property on their own in future. If that’s a concern, it may be worth taking out life insurance. This provides cover for the partial or full amortization of a mortgage.
Premature termination of a fixed-rate mortgage can prove expensive
If this happens due to divorce or separation, the consequences can be serious, especially if the couple are tied to a long-term fixed-rate mortgage. If a mortgage deal has to be cancelled early because of a separation, fees and a prepayment penalty are incurred. This can easily cost thousands of francs in times of steady or falling interest rates.
In some cases, the person who is more dependent and not the person who pays more is allowed to stay
Finally, there’s the question of who gets to stay in the shared house or apartment if a couple splits up. The obvious assumption that it belongs to the person who owns most or even all of the property doesn’t always apply.
If one party refuses to agree to a sale or to move out voluntarily, the separation and the sale can become a very long, drawn-out process: the rental relationship is governed by the usual protective provisions, termination can be challenged and postponed numerous times by the rent tribunal. And who wants to buy a house or condominium if they can purchase only part of it because it is co-owned by a party who is unwilling to sell?
Reasons for selling a property after separation/divorce
Money is the key factor
Survey of over 1,000 people during or after separation/divorce, multiple answers permitted
| Reason for sale | Percentage |
|---|---|
| Reason for sale Too expensive alone |
Percentage 49% |
| Reason for sale To repay debt with the bank |
Percentage 36% |
| Reason for sale Nobody wants to stay |
Percentage 23% |
| Reason for sale Too big for one person |
Percentage 23% |
| Reason for sale Money needed for other things |
Percentage 15% |
| Reason for sale To get a good price |
Percentage 13% |
| Reason for sale Other |
Percentage 5% |
Source: ImmobilienScout24
Questions and answers
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One person usually moves out if a couple separates. In the case of sole ownership, that’s usually the person without children. Or this person may stay due to a rental agreement. If the property is co-owned, both partners can sell their share, but the other party has a right of first refusal. If a property is under common ownership, both partners must agree on what happens to it. It is strongly recommended to set out the separation procedure beforehand in a partnership agreement.
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The key factor is who is more dependent on the shared family home. And in most cases, especially if there are children involved, that’s the person with childcare responsibility. Depending on the divorce decree or separation agreement, the person can often stay in the existing home, but the partner must pay appropriate rent interest. This even applies if the apartment or home is under the sole ownership of the other party.
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In the case of sole ownership, one of the two partners is fully responsible for the property and the costs involved. The other person may contribute to the costs based on a rental contract or a different kind of agreement. With co-owned properties, the land register entry indicates who is legally responsible for which share of the property. That can be 50 percent each or based on a ratio decided upon by the partners. If a property is under common ownership, both partners are fully responsible for it. The contributions towards financing the property don’t necessarily have to reflect the ownership shares entered in the land register.
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Cohabitation of unmarried couples isn’t governed legally. This means that couples without a marriage certificate should make their own arrangements for governing cohabitation and seek expert advice. The most secure way is through a partnership agreement that sets out the key issues before any conflicts arise. In particular, such agreements define who is responsible for the rental agreement or the form in which shared property should be purchased. They can also stipulate who moves out in the event of separation. However, where children are involved, the court isn’t obliged to adhere to this kind of prior arrangement between the parties.
