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Court Rules on Nonmarital House Appreciation

Court Rules on Nonmarital House Appreciation

A recent ruling of the Florida Supreme Court will affect all future cases regarding equitable distribution of non-marital house appreciation.

The ruling in the Kaaa v. Kaaa case, which was brought before the Second District Court of Appeal, was in direct conflict with the decision of the First District Court of Appeal in Stevens v. Stevens. Therefore, the Florida Supreme Court reevaluated the circumstances associated with both cases and narrowed the question at hand to “whether and under what circumstances the passive appreciation of a marital home that is deemed nonmarital real property is subject to equitable distribution under section 61.075(5)(a)(2), Florida Statutes (2007),” which defines marital liabilities as “The enhancement in value and appreciation of nonmarital assets resulting either from the efforts of either party during the marriage or from the contribution to or expenditure thereon of marital funds or other forms of marital assets, or both.”

After reviewing both cases, the Court decided to quash the Second District’s decision in Kaaa and approve the First District’s decision in Stevens.

The Court concluded that “In sum, when a marital home constitutes nonmarital real property, but is encumbered by a mortgage that marital funds service, the value of the passive, market-driven appreciation of the property that accrues during the course of the marriage is a marital asset subject to equitable distribution under section 61.075(5)(a)(2), Florida Statutes (2007).”

In determining whether a nonowner spouse is entitled to a portion of the passive appreciation, the court is required to perform a five part test. First, the court is to ascertain the fair market value of the property. Next, the court is required to determine whether there has been passive appreciation in the home’s value. Third of all, the court must find that the passive appreciation is a marital asset under Florida Statute 61.075(2) by virtue of whether marital funds were used to pay the mortgage, whether their were contributions to the property by the nonowner spouse and the extent that these contributions affected the appreciation of the nonmarital asset. Fourth, the court is to then determine the value of the passive appreciation that accrued during the marriage. Finally, the court is to compute how the passive appreciation should be allocated by dividing the indebtedness at the time of the marriage by the value of the asset at the time of the marriage.

To read the full article, click here.

If you have non-marital assets that you would like to protect in the event of a potential divorce, the Men’s Divorce Law Firm firmly suggests that you and your partner fully execute a pre-nuptial agreement or post-nuptial agreement.

If you have property that is non-marital or believe that you may have an interest in your spouse’s nonmarital property, contact the Men’s Divorce Law Firm today to learn more about your rights.

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