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Using Marital Funds to Pay Down a Mortgage on a Non-marital Property and Its Impact on Your Florida Equitable Distribution

writing-clipart-check_writing.gifCreating an equitable distribution between divorcing spouses can often be complex. This can be especially so when one or both spouses hold nonmarital assets that are subject to mortgages and use marital assets to make the mortgage payments on those properties. In the case of one Southwest Florida couple, the 2d District Court of Appeal ruled that the wife should received an offset because, even though the husband’s property declined in value during the marriage, his equity in the asset increased as a result of paying down the mortgage using marital funds.

In this circumstance, R.S. (husband) bought a building in Queens, NY in 1998 that housed two residential apartments and a commercial space. By the time the building owner married his wife, M.S., in 2007, the value of the building stood at approximately $900,000. Shortly before the couple separated five years later, the husband sold the building for $680,000. At the couple’s divorce trial in Fort Myers, the court concluded that the building did not appreciate in value during the duration of the marriage.

The building was mortgaged the entire time the husband owned it. During the marriage, the mortgage balance was reduced by an amount of $23,651. Neither spouse disputed at the trial that the mortgage payments on the building were made using marital funds. Based on this, the wife argued at the trial that she was entitled to an equitable distribution equal to one-half of the amount paid on the mortgage. The trial judge, however, rejected the claim. The judge decided that, since the building did not appreciate in value during the marriage, the amount paid on the building’s mortgage was not something that should be included in the equitable distribution.

The wife appealed and was successful. The court rejected the husband’s argument that, since the building declined in value from 2007 to 2012, the wife had no claim for a distribution related to the mortgage payments. Whether or not an asset subject to a mortgage or other loan appreciates in overall value is not the issue when it comes to equitable distribution in a divorce. If the asset goes up in overall value, or even if it goes down, paying down the mortgage tied to that asset inherently increases the value of the owner’s equity in that asset. If the couple had not paid down the mortgage during the span of the marriage, the net proceeds the husband would have received when he ultimately sold the building would, as the court put it, “have been reduced by an amount equal to the pay down of the debt. It follows that the resulting increase in the equity value of the Queens building was a marital asset subject to equitable distribution.”

Regardless of what became of the overall value of the building during the marriage, the payments provided an inherent financial benefit to the husband in increasing his equity in the building. Since that benefit to his nonmarital asset was obtained through the expenditure of marital assets, the wife was entitled to the equitable distribution related to the mortgage payments.

For determined representation and knowledgeable advice about your equitable distribution and other divorce issues, contact the South Florida divorce attorneys at Sandy T. Fox, P.A. Our attorneys have the experience and dedication you need on your side.

Contact us online or by calling (800) 596-0579 to schedule your confidential consultation.

More blog posts:

Court Says Wife Had No Claim to South Florida Home that Lost Value During Couple’s Marriage, Fort Lauderdale Divorce Lawyer Blog, Aug. 19, 2015
Court Can’t Use Contempt Powers on Wife Who Didn’t Pay the Mortgage, Fort Lauderdale Divorce Lawyer Blog, Feb. 19, 2014