Disposing of a Marital Home Before a Divorce Is Completed

By: Curtis Wiberg

In a typical divorce where a couple are owners of a home, that home is often one of the most valuable assets of the marriage, and the issues of possession and division of the net equity can become a greatest sources of dispute. The court is tasked with a duty to equitably divide the parties’ assets and debts under C.R.S. 14-10-113 and the timing of this division generally occurs at the time of the final orders and decree.

Because the net equity can be a ready source of cash at the time of sale or refinancing, parties are often desirous of tapping into that asset while the divorce is ongoing. At times, they agree to allowing one party to refinance and buy out the other spouse from their share of the equity, or just selling the house and dividing the net proceeds from the sale at closing. Under CRS 14-10-107, an automatic temporary injunction goes into effect, at the commencement of the divorce, against both parties, which prohibits disposal of marital property without an order of the court or by mutual agreement. If the parties agree to the disposition of property during a divorce, they can submit their agreement to the court, for it to become a court order.

There are divorces, however, in which one party wants to sell the marital home as soon as possible and the other refuses. What then? The Colorado Court of Appeals addressed such a case in In re: Marriage of Gavend, 781 P.2d 161 (Colo. App. 1989).

In Gavend, the wife appealed a pre-decree order to sell the marital home after husband stated the parties’ financial circumstance prevented the parties from keeping up with the payments. The trial court reasoned that while marital property cannot be disposed of under CRS 14-10-107, CRS 14-10-108 allows a court to enter temporary or interim orders concerning the parties’ marital property. Reading the two statutes together, the Gavend appellate court determined that in the appropriate circumstance, a court did have the authority to permit the disposal of property (via sale of the marital home). Specifically, the Gavend court ruled:

We conclude that if, as here, there is evidence of extreme circumstances that co-owned property needs to be sold to preserve equities therein, a court may decree a sale of the property prior to a final determination of the merits of the dissolution action… The trial court determined that the parties, because of accumulated marital debts, were in extreme financial circumstances and that the husband’s earnings were not sufficient to meet their current expenses and the required payments upon their existing obligations, but that the parties had substantial personal property which could be sold to meet the immediate monthly mortgage payments on the residence. Accordingly, the trial court gave the wife the option to sell personal property in order to make the upcoming mortgage payment or otherwise assume the mortgage payments to avoid selling the home, and if she chose not to do so, then the property was to be listed for sale with the net proceeds retained for division on permanent orders. The court stayed execution of this order for 11 days to allow the wife to exercise this option. The wife declined to do so, and the residence was subsequently sold.

Gavend, 781 P.2d at 163.

While Gavend is not a lengthy opinion with detailed analysis, it has since become one of the most important cases for a party unable to keep up with payments on a home, and endangering both parties net equity in the home. In other words, the Gavend threshold of showing “extreme circumstances” for a sale of a home (e.g.: a potential foreclosure, forced short sale, damaged credit, etc.) provides a financially strapped party an avenue of relief, without having to wait until a final order or trial to do so.

In one of my own cases, I was able to obtain a pre-decree order for sale of real estate when on party arbitrarily changed his mind weeks after signing a listing agreement, inducing the other party to expend time and resources getting the home ready for sale. This is an argument rooted in the legal theory of “estoppel,” which generally provides that a party who takes action based on the representations of the other party, is entitled to enforce those representations of the other party.

If you are in a circumstance where you do not feel you can afford to wait until final orders to dispose of marital property, contacting an experienced divorce attorney should be your first step.

Curtis Wiberg

Plog & Stein, P.C.