Property in a divorce

Divorce Property - Divorce property refers to real estate that must be divided, transferred, or sold in the course of a divorce. It is one of the most financially and emotionally challenging asset issues in divorce proceedings, as a home or investment property often represents the largest single asset in the couple’s joint estate.

What exactly does “divorce property” mean?

When a marriage ends in divorce, the assets acquired during the marriage must be divided as part of the equalization of accrued gains (Section 1363 et seq. of the German Civil Code, BGB)-provided the spouses are under the statutory matrimonial property regime of community of accrued gains, which applies to the vast majority of marriages in Germany. The property itself is not automatically divided equally. Instead, each spouse’s accrued gains are calculated, and the spouse with the higher accrued gains must compensate the other for half of the difference.

In practice, the spouses have several options available to them. The most common solution is the sale of the property and the subsequent division of the proceeds. This creates a clear-cut situation and resolves the joint loan obligation to the bank. Alternatively, one spouse can pay out the other and take sole ownership of the property-this requires an amendment to the land registry, and the financing bank must agree to the releasing of the departing partner from the loan agreement (debt release). A physical division is only an option for multi-family homes or divisible properties, where separate units are created.

An often underestimated aspect is the joint mortgage. Both spouses are jointly and severally liable to the bank-regardless of who uses the property after the separation. Divorce alone does not alter this liability. As long as both are named in the loan agreement, the bank can demand full payment of the installments from either of them. Therefore, the loan issue must be resolved before or, at the latest, concurrently with the division of assets.

For tax purposes, the speculation period of ten years (§ 23 EStG) must be observed. If the property was acquired within this period and has not been continuously occupied by the owner in the meantime, capital gains tax may be due upon sale. However, an exception applies: If the property was used exclusively for the owner’s own residential purposes in the year of sale and in the two preceding calendar years, taxation does not apply-even within the ten-year period. By contrast, the transfer of property between spouses as part of the equalization of accrued gains is exempt from real estate transfer tax.

Separating Emotional and Financial Decisions

A property involved in a divorce is rarely just a financial matter. Memories are tied to the shared home, children have their familiar surroundings, and parting with the property can feel like a second loss. This is precisely why it is crucial to consciously separate emotional and financial aspects.

Anyone wishing to keep the property for sentimental reasons should realistically assess whether the ongoing costs-mortgage payments, utilities, and maintenance-are sustainable in the long term, even with their current income. An independent property appraisal provides an objective basis for negotiation and prevents one spouse from paying too much or receiving too little. We recommend engaging a neutral expert early on, before lawyers and the court have to dispute the value.

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, real estate prices have risen significantly in recent years, which further increases the financial implications of a property involved in a divorce. A single-family home in Nuremberg-Erlenstegen or a condominium in Fürth-Südstadt can now trigger a substantial equalization of gains, whereas ten years ago the amount would have been more moderate.

Our network of experts recommends that property owners in Franconia have a market-based appraisal prepared promptly in the event of a divorce-ideally by an appraiser who is familiar with the local submarkets. This helps you avoid protracted disputes over appraisals and establishes a solid foundation for an amicable division of assets. If a sale is the best solution, discreet and professional marketing is essential to achieve the best possible price and minimize the burden on all parties involved.

Frequently Asked Questions

Is it mandatory to sell the property in a divorce?

No, a sale is only one of several options. The spouses can also agree that one partner will buy out the other and take sole ownership of the property. The prerequisite is that the financing is manageable on one’s own and that the bank releases the departing partner from the loan agreement. Only if no agreement is reached can a partition auction be requested as a last resort-however, this often results in proceeds significantly below market value.

Is capital gains tax due when selling a property acquired during a marriage?

That depends on the holding period and the use of the property. If the purchase was made more than ten years ago, the profit is tax-free. Within the ten-year period, capital gains tax does not apply if the property was exclusively owner-occupied in the year of sale and the two preceding years. If, on the other hand, the property was rented out and sold within ten years, the capital gain must be taxed at the personal income tax rate.

Who is allowed to continue living in the property during the separation?

In principle, both spouses have a right of use to the joint marital home until the divorce becomes final-regardless of who owns the property. In the event of a dispute, the family court may, pursuant to § 1361b BGB, assign the home to one spouse for sole use if this is necessary to avoid undue hardship. This applies in particular to cases involving children or domestic violence.

What is a partition auction, and how does it affect the proceeds?

If the spouses cannot reach an agreement, each co-owner has the right to apply to the local court for a partition auction (Section 180 of the German Partition Act (ZVG)). The court auctions the property publicly, and the proceeds are divided among the co-owners according to their respective shares. However, a partition auction is generally a poor option for both parties: foreclosure auction proceeds are typically 20 to 40 percent below the achievable market price, as many bidders factor in the risk of unknown conditions and institutional bidders calculate risk premiums. In the Nuremberg metropolitan area, where properties achieve significantly higher proceeds when sold privately through experienced real estate agents, it is almost always more economically sensible to agree on a voluntary sale. We support owners in divorce situations with discreet, professional marketing and help optimize the outcome for both parties by setting a market-driven price.

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