Co-Ownership of a Home Post-Divorce in Colorado
For many couples going through divorce, the family home is both the most significant asset and often the most sentimental in value. Deciding what happens to it can be one of the most challenging aspects of a divorce settlement. While the traditional options are for one spouse to buy out the other or for the parties to sell the home and split the proceeds, some divorcing couples in Colorado are choosing another route: continuing to co-own the home after divorce.
With the rise in interest rates and home values in Colorado continuing to appreciate, couples frequently come into the mediation process with the intent to co-own their marital home for some period, and utilize the mediation process to work through the details of co-ownership.
Why Consider Co-Ownership After Divorce?
Although it may not be the first solution that comes to mind, nor optimal for some couples who need the separation provided by severing their ownership interests, co-ownership can sometimes provide a practical middle ground. Common reasons include:
Financial flexibility: Neither spouse may have the immediate ability to refinance or buy out the other’s interest. This is especially the case in marriages where one spouse has been a homemaker and may need an extended period to return to the workforce, as well as to qualify to assume or refinance a mortgage with the income provided by spousal support if that support is limited in amount or duration.
Stability for children: Keeping children in the family home can reduce disruption during an already difficult transition. I’ve worked with a number of couples who came into the mediation process with the intent to keep a child or children in the home until high school graduation, for example. This can work well but it should generally be tied to an end date as a best practice. For my clients in Crested Butte and Gunnison and other towns in the western slope this is quite common given the limited housing available, and the fact that home values have appreciated so dramatically since many couples purchased their home 10 or 15 years ago.
Market timing: Couples may sometimes wish to delay selling until market conditions are more favorable. For couples in mountain towns in particular the selling window can be short, and may not line up with the needs of the parties in terms of separating and finding alternative housing, so it can sometimes make sense to agree to a timeline for selling that is a year or more in the future.
Legal Considerations in Colorado
Colorado is an equitable division state, meaning marital property is divided fairly, not necessarily equally. Courts generally allow divorcing spouses to continue co-owning a property if both agree and the arrangement is workable. However, there are several important legal issues to address:
Title and mortgage liability: Even if the divorce decree allocates responsibility for payments, both spouses remain legally responsible if their names are on the mortgage. Missed payments can affect both parties’ credit. There should be clear terms in the parties’ separation agreement addressing, amongst other things, what happens if a payment is late or missed, and detailing the timeline and process for listing the house for sale as necessary in order to protect the non-defaulting spouse’s credit.
Equity and expenses: Agreements should clearly define how equity is shared once the parties are divorced and are no longer accruing marital equity in the home. Is the division of equity in the future 50/50 for example, or is the spouse living in the home entitled to a greater portion of proceeds for the principal he/she pays down post-divorce? Responsibility for the ongoing and routine costs associated with the home including the mortgage, taxes, insurance, and all utilities will generally fall to the spouse who continues to live in the home while it is co-owned. For non-routine maintenance and repairs, or pre-sale improvements, there should be a clear procedure to ensure these costs are agreed-upon in advance in order to avoid future disagreements when a new hot water heater needs to be purchased or the roof replaced, for example. If one spouse covers the costs of major repairs they can be reimbursed through the sale proceeds but all expenditures should be carefully accounted for so there aren’t disagreements once the proceeds are ready to be divided.
Future sale or buyout: A clear exit strategy is critical, whether tied to a child’s graduation, a set number of years, or another triggering event. Frequently couples who are amicable at the time of their divorce believe that they will be able to work out how the terms of joint ownership as they go along and that they can just agree to continue owning together indefinitely. This approach frequently results in challenges down the road when one spouse begins a new relationship, or decides they no longer want to get out of the arrangement and the other may disagree. It is essential to have clear terms addressing what happens if either party wants to be bought out before a future sale and/or the timeline for listing the house in the future.
Practical Challenges of Post-Divorce Co-Ownership
While co-ownership may solve short-term problems, it also presents potential complications and couples should carefully consider whether it is the right option for their particular circumstances. Some factors include:
Ongoing financial ties: Shared responsibility for major expenses can strain the post-divorce relationship.
Decision-making conflicts: Disagreements about repairs, improvements, and the when/how of selling can lead to ongoing disputes.
Changing circumstances: New relationships, job changes, or changes in financial circumstances may disrupt the arrangement.
Have an agreement that can be implemented and also protects both parties’ interests
If you are considering co-ownership of the family home after divorce, it is essential to:
Formalize the agreement. A detailed co-ownership agreement, the terms of which are set out in your separation agreement and incorporated into your divorce decree, can help prevent future disputes.
Determine how to address conflict. It generally makes sense to have a quick, fail-safe way to resolve disputes regarding co-ownership without having to return to court, which can take many months or longer. Agreeing in advance that any disputes will be subject to Mediation/Arbitration (Med/Arb) is an excellent way to insure that you will have a third party neutral available to resolve a dispute and even issue a binding decision if you cannot come to an agreement yourselves.
Consult professionals. Working with an attorney-mediator or your attorney is recommended to ensure the arrangement protects the rights of the parties, can be implemented from a practical standpoint and is sustainable. Depending on the specifics of your financial situation it may also be helpful to consult with a CDFA (certified divorce financial advisor) to address tax questions and financial nuances that may impact either party.
Plan for contingencies. Address “what if” scenarios—such as one party wanting to sell early, a refinancing opportunity, or unexpected expenses.
Co-ownership of a home after divorce in Colorado can be a creative solution, but it is not without risks. With careful planning, clear agreements, and professional guidance, it may provide financial stability and continuity, particularly for families with children. It is more common in the context of a mediated divorce in which the parties have sought to reach their agreements outside of the court process. However, it can also be an option in uncontested divorces in some circumstances. Amy has worked with clients both in her capacity as an attorney-mediator and representing clients on a consulting basis who wish to continue co-owning the family home.
Amy works with clients to evaluate their options and craft financial agreements that balance immediate needs with longer-term solutions. If you are navigating divorce and have questions about your home, please consider scheduling a consultation to discuss the solutions that may work best for your situation.