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You Are in the Middle of a Divorce and You Just Found Out Your Spouse Sold the Community Property Home

First, a little lesson on California law: California is a community property state. That means that everything acquired during the marital period is considered community property. The marital period starts from date of marriage and ends on date of separation. Now, for most folks, date of separation is a no-brainer. And for others, ascertaining the date of separation is not so easy. For this discussion, we will assume that husband and wife agree on what the date of separation is so that there can be no confusion of whether or not a party engaged in willful behavior. Property is characterized as either community property or separate property.

Regardless of what one party thinks about the characterization of the property, they are restricted from doing anything with the property once a Petition for Dissolution of the Marriage has been filed. At the time a Petition for Dissolution of Marriage is filed, so too is a document known as a Summons is also filed. On the backside of the Summons, are orders known as automatic temporary restraining orders (“ATROS”). ATROS prohibit any party from disposing of or concealing any property. If the parties follow the ATROs, then there would be no concern about the sale of the home.

Also, in order to get divorced in California, the parties are required to fill out documents known as preliminary financial disclosures. California family law requires that the parties always be transparent and fully disclose any and all assets and debts—to include separate property assets and debts. The reason separate property also needs to be included is because many times the person who thinks the property is separate is wrong in their assessment of its characterization. For example, just because a bank account is in one party’s name does not make that bank account separate property—especially if it was opened during the marital period. So, it is important to list everything on the preliminary disclosure forms. Thus, the home should be listed on the disclosure forms—regardless of whose name is on title.

So back to the question, can the other party sell the house without the other party’s knowledge or consent during the pendency of the divorce? Answer: no! But, here is the problem: just because a party is not allowed to sell the house because the ATROs are in effect, doesn’t mean a party won’t or can’t. For example we all know we are not allowed to cross a red light; however, there are many people who cross red lights every day! Why? Because no-one is looking or watching. In other words, for practical purposes, there is nothing to stop the spouse from engaging in fraudulent behavior.

So, what should an innocent party do if they have discovered that their spouse has sold the real estate? If a spouse has sold the property without the other party’s knowledge or consent, the innocent party would need to immediately file a motion with the court to ask for an injunction or an order to prevent the guilty spouse from doing any further damage. The damage that can be done is, for example, the guilty spouse starts treating the sales proceeds as their own money and starts spending it. If the innocent party does not quickly take action upon discovering the conduct, he or she may lose out because the guilty spouse may spend all the money before the divorce is finalized. Another thing to consider should the innocent party file a motion is to ask for sanctions, to include attorney’s fees. Sanctions are sums of money made payable to the innocent spouse as a form of punishment for the guilty party’s illegal behavior.

I always recommend that a party carefully monitor all assets during the pendency of the divorce to ensure the other party is not engaging in illegal behavior.

In sum, unless the court orders or the parties mutually agree (stipulate), a community property home must never be sold before the divorce is finalized.