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How Do Divorce Courts Divide Real Estate Properties with a Negative Value?


Real estate investing is risky. When you buy a property that you do not plan to inhabit, you are making assumptions about how economic conditions in the area where the property is located will be years, if not decades, in the future.  The fluctuations of the real estate market can be stressful even for couples who generally have a good relationship.  If a real estate property owned by the couple has a negative value at the time the couple files for divorce, it can be a major point of contention.  How the court assigns ownership of the liability in determining distribution of property varies from one family to another, but one thing the trial court cannot do is ignore the existence of the money-sucking real estate property completely.  A South Florida divorce lawyer can help you sort out the division of marital debts and other difficult situations.

When the Marital Property Includes an Unfinished House in the Virgin Islands

Two events during Calvin and Toleatha Callwood’s marriage would become major points of dispute in their divorce.  One was that they bought a plot of land in a gated community called Estate Peterborg in the U.S. Virgin Islands.  They hired contractors to build the house, but at the time of their divorce, and indeed at the time the appeals court issued its ruling, the construction was unfinished.  Both spouses estimated that the property was worth about $565,000, and that its value would increase to at least $3 million once construction was complete and the house received an occupancy permit.  What the trial court did not take into account was that the liens on the property exceeded its value, leaving it with a value of about negative $69,000.

The other issue was that Calvin served a jail sentence during their marriage, and the criminal conviction on his record reduced his earning potential.  After his release from jail, Calvin worked as a dispatcher for a taxi company owned by his girlfriend; he also earned about $850 per month from a rental property he owned.  He estimated that his monthly income was $2103, but his expenses were $4749.  The trial court ruled that, based on Calvin’s actual spending, he must be receiving money from a source he did not list in his financial disclosures, such as his parents or his girlfriend.  In his appeal, he asked the appeals court to recalculate his income for purposes of determining child support.

When it ruled on Calvin’s appeal, the appeals court reversed the trial court’ rulings on both of these issues and remanded the case to a lower court.

Reach Out to Us Today for Help

Sometimes dividing marital liabilities is even more complicated than dividing marital assets, but a South Florida divorce lawyer can help.  It is not fair for one spouse to write off a liability while the property remains a source of debt for the other spouse.  Contact the Boca Raton divorce lawyers at Schwartz | White for a consultation.


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