How Should You Handle a Property During a Divorce?

Here are the main steps and options to consider when deciding what will happen to a property following a divorce:

• Before making any decision, the property should be professionally valued. This valuation provides a basis for negotiations between the spouses and for discussions with the bank if the property is subject to a mortgage.
• Once negotiations have been completed, there are generally three possible options: selling the property, one spouse buying out the other's share, or retaining joint ownership of the property.
• The solution chosen should take into account Swiss law, the lender's requirements and the family's circumstances after the divorce.

Option 1: Selling the Property

Selling the property is often the preferred solution when neither spouse is able or wishes to keep it. The proceeds from the sale are generally used to:

• Repay the outstanding mortgage.

• Cover the costs associated with the transaction.

• Divide the remaining balance between the spouses according to their respective rights.

However, the distribution of the proceeds does not depend solely on the selling price. It may be adjusted to reflect each spouse's initial financial contribution, mortgage repayments made during the marriage or any personal investments made in the property.

In Switzerland, real estate capital gains tax is levied at the cantonal level. It applies in every canton, although the rules vary depending on how long the property has been owned and the circumstances of the transfer.

In the context of a divorce, some cantons allow the taxation to be deferred or adapted when ownership of the property is transferred between former spouses as part of the division of matrimonial property.

Option 2: One Spouse Buys Out the Other's Share

A buyout allows one spouse to retain ownership of the family home by compensating the other spouse financially. This solution is common when children continue to live in the property or when one spouse wishes to remain the owner.

How Does a Buyout Work?

First, a real estate expert or the bank determines the property's current market value. The lender then deducts the outstanding mortgage balance to calculate the property's net equity. Finally, each spouse's share is determined according to their ownership interest.

For example, if a property is valued at CHF 900,000 and has an outstanding mortgage of CHF 500,000, its net equity amounts to CHF 400,000. If the spouses each own 50% of the property, they are each entitled to CHF 200,000.

The spouse taking over the property must then pay this amount to the other spouse, subject to any adjustments required under the matrimonial property regime, and obtain the bank's approval to assume full responsibility for the mortgage.

Does the Bank Have to Approve?

Even if both spouses agree, the bank must formally approve the mortgage transfer. It assesses whether the spouse taking over the property can afford the financial obligations alone by considering three main criteria:

• Affordability: Housing costs (calculated using a theoretical interest rate of around 5%, mortgage amortisation and maintenance costs estimated at 1% of the property's value) should generally not exceed 33% of the buyer's gross income.

• Debt level: The lender also considers other financial commitments, such as leasing contracts or consumer loans.

• Income stability: The buyer's income must be sustainable over the long term. Maintenance payments received for a limited period are often not taken fully into account.

Without the bank's approval, the departing spouse cannot be released from joint liability for the mortgage, making the buyout impossible.

What Happens to the Mortgage?

The mortgage agreement remains fully valid despite the divorce. Until the bank formally releases the departing spouse from liability, both spouses remain jointly and severally liable for repayment of the entire mortgage debt.

To resolve this situation, four main options are available:

• One spouse takes over the mortgage.

• The mortgage is renegotiated.

• The spouses temporarily maintain joint financing.

• The property is sold to repay the outstanding mortgage.

Option 3: Keeping the Property Under Joint Ownership

Some divorced couples decide to retain joint ownership of the property, at least temporarily. This solution is often chosen to provide stability for the children or to wait for more favourable conditions in the real estate market before selling.

When Is This Option Appropriate?

Keeping the property under joint ownership may be an appropriate solution in certain situations:

• Children's schooling: It avoids a disruptive move and allows the children to remain in their familiar environment during the transition.

• An unfavourable real estate market: It makes it possible to postpone the sale and avoid a financial loss caused by selling too quickly.

• A good relationship between former spouses: It is suitable when both parties are able to communicate calmly and cooperate on the management of the property.

What Are the Risks?

However, choosing this option may also involve several drawbacks:

• Ongoing joint financial liability: Both former spouses remain jointly liable to the bank for the mortgage. If one fails to meet their obligations, the other must cover the full amount.

• Decision-making deadlocks: Any significant decision, such as renovation work or maintenance, requires the agreement of both parties, which may reignite conflicts.

• Delays to future projects: The equity remains tied up in the property, and the existing mortgage may prevent either party from purchasing another property.

• A prolonged co-ownership situation: Without a clearly defined deadline in the divorce agreement, ending the joint ownership later can become complex and contentious.

H2: How Does the Matrimonial Property Regime Affect the Outcome?

The matrimonial property regime has a direct impact on how the property is divided following a divorce:

• Participation in acquired property (the default legal regime): Assets acquired during the marriage are divided, while each spouse retains ownership of their personal assets.

• Separation of property: Each spouse keeps their own assets and debts unless the property is explicitly owned jointly.

• Community of property: In principle, the assets belong jointly to both spouses and are divided according to the terms of the matrimonial agreement.

These principles and their application in the event of a divorce are governed by the Swiss Civil Code (Articles 181 et seq.).

FAQ

How Is a House Divided in the Event of a Divorce in Switzerland?

The division depends on the matrimonial property regime, each spouse's financial contributions and the way the property was financed.

Can You Keep a House After a Divorce?

Yes. One spouse may buy out the other's share, or the former spouses may agree to retain joint ownership of the property for a certain period.

How Is a Buyout Amount Calculated?

The calculation starts with the property's current market value. The outstanding mortgage is then deducted, and each spouse's share is determined according to their ownership interest.

Who Pays the Mortgage After Separation?

Until the mortgage agreement is formally amended by the bank, both borrowers remain jointly and severally liable for repaying the entire mortgage.

Is Selling the House Mandatory After a Divorce?

No. Selling the property is only one possible option. The best solution depends on the family's circumstances, the financial situation and the agreement reached between the former spouses.