While it is common for one spouse to require a new home after separation, it is unfortunately also common for divorcing spouses to attempt to dispute or hide marital assets out of a perceived need for self-preservation or even for revenge. The Family Code protects against this latter occurrence through a set of “automatic temporary restraining orders” (also known as “ATROS”) designed to preserve the status quo during divorce proceedings. In order to comply with the ATROS, a spouse seeking to buy a home must usually obtain the other spouse’s written permission for the purchase, or else obtain an order from the court.
Restrictions on Property Transfers and Extraordinary Expenditures
The automatic temporary restraining orders are listed in detail on the back of each divorce summons. Of particular interest to a party wishing to purchase a home is the third order, which reads as follows:
“[Both parties are restrained] from transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi–community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life; and requiring each party to notify the other party of any proposed extraordinary expenditures at least five business days before incurring those expenditures, and requiring each party to account to the court for all extraordinary expenditures made after service of the summons on that party.”
Thus, a spouse seeking to buy a home must generally:
- Provide the other spouse with notice of the purchase at least five business days before it is to take place;
- Obtain the other spouse’s written consent, or, failing this, an order of the court; and
- Prepare to disclose all information and documents used for the purchase, including:
- All information regarding the source of the funds to be used for the down payment and mortgage
- The loan application
- The sale agreement and closing documents
Marital dissolution cases frequently raise questions as to whether the property belongs to one spouse separately or to both spouses together. Even if an asset is clearly one spouse’s separate property, its nature and value may need to be taken into account for the purpose of determining support and attorney’s fee awards. As such, the purpose of this temporary restraining order is to protect the rights of both parties in dissolution proceedings. Either party may seek relief from the court as to the temporary restraining order without posting a bond or facing other additional hurdles. The order remains in effect until the judgment is entered, the petition is dismissed, or the court makes another order.
Read literally, the temporary restraining order appears to forbid a divorcing spouse from even buying groceries, until one reads further and finds that there are two small exceptions to this rule for property transferred in the “usual course of business” or for the “necessities of life.” In one appellate case, the husband owned a real estate management company. During divorce proceedings, the husband’s company attempted to sell a property and use the proceeds to invest in a mobile home park. The wife believed that the house was being sold for an inadequate price and refused to consent to the transaction. Yet, the court of appeals held that the attempted sale did not violate the automatic temporary restraining orders because the husband’s company was formed, in part, for the purpose of selling real property. The court reviewed the company’s past transactions and determined that this sale was in the “usual course of business.”
Notwithstanding narrow exceptions to the rule for property transferred in the “usual course of business” or for the “necessities of life,” when it comes to real estate, the prudent course of action is to obtain the other spouse’s written consent or a court order for each purchase. The penalties for violation of automatic temporary restraining orders can be severe. Knowing and willful violations of the order may be punishable as a misdemeanor or through contempt proceedings. Even non-malicious violations may require court intervention. For example, the court may order the name of the other spouse to be added to the title of the purchased home or require the other spouse to be reimbursed for his or her interest plus attorney’s fees and costs.
If your spouse refuses to consent to your proposed purchase of a home, you may file a request for a court order authorizing the transaction. If your spouse’s non-cooperation is unreasonable or spiteful, then you may also request that the court order your spouse to contribute to your attorney’s fees and costs as sanctions for his or her misconduct. And if time is of the essence (i.e., if you will lose the opportunity to purchase the house unless you take prompt action), then you may file an ex parte request for an emergency court order. However, you should still do all that you can to obtain agreement through your spouse’s written consent, both before and after you file the ex parte request.
The automatic temporary restraining order against property transfers and extraordinary expenditures may appear tedious to one who wishes to purchase a home, but it is not an insurmountable hurdle. Real property may still be purchased before your divorce is final, with your spouse’s written permission or a court order. Additionally, if there are special circumstances that make the automatic temporary restraining order unreasonable in your case, you may apply to the court for modification or revocation of the order, or for expanded or additional temporary orders.
Stipulation and Interspousal Transfer Deed
Even if you purchase a home in your own name after a divorce, your spouse may have certain rights to the property based on the source of the funds used for the purchase. All income earned by either party between the date of marriage and the date of separation is generally considered community property, in which each spouse has an equal one-half interest. By contrast, funds acquired before marriage, after separation, or through gift or inheritance, are classified as the acquiring spouse’s separate property.
Suppose you purchase a home free and clear shortly after separation, but you use funds that were earned exclusively during the marriage. Your spouse will have a claim for reimbursement as to the following:
- One-half of the funds used to purchase the home;
- One-half of any accumulation in the value of the home between the date of purchase and the date of trial; and
- One-half of the fair rental value of the home between the date of purchase and the date of trial (assuming your spouse does not have use of the home during this period).
However, where the purchasing spouse is in the midst of a divorce, the title company will typically require the non-purchasing spouse to sign over any rights in the property using an Interspousal Transfer Deed. The non-purchasing spouse will, therefore, wish to prepare and execute a Stipulation and Order to preserve his or her rights to reimbursement, despite the change in title.
A Stipulation and Order should specifically state that the non-purchasing spouse agrees to waive all automatic temporary restraining orders relating to the transaction which would otherwise prevent the purchase, but that the waiver should not be construed as a general waiver of the temporary orders for any other purpose or transaction. Additionally, the Stipulation and Order should include findings that describe the source and amount of funds used to purchase the home, so that the court can easily enforce the order in the future if necessary. Supporting documentation may be attached as exhibits, with all personal identifying information redacted.
Undisclosed Real Estate Purchases
Do not attempt to conceal the purchase of real property from your spouse. The Family Code requires each spouse to prepare detailed financial disclosures and sign them under penalty of perjury. Failure to make complete and accurate disclosures can result in serious penalties, even if the omission is not discovered until after a final divorce decree has been entered.
Moreover, deeds and many other real property documents are a matter of public record, such that others can determine whether you purchased real property. Each county maintains indexes of real property records, usually at a recorder’s office located at or near the courthouse. These records can typically be inspected in person for free, and some counties make their indexes available online. For instance, all deeds in Orange County that have been recorded since 1982 are available at cr.ocgov.com/recorderworks. And if a spouse does not know which county to search, some databases will provide broader, more advanced searches. Many professionals, such as lawyers, mortgagors, and private detectives, regularly subscribe to these databases.
If you would like to purchase a home before your divorce is final, contact Bremer Whyte Brown & O’Meara at (949) 221-1000. One of our experienced family law attorneys can assist with the process of drafting a Stipulation and Order that preserves your rights and minimizes future litigation, and, if necessary, obtaining a court order to authorize the transaction.