Purchase of real estate during marriage and community of property
Buying a property is often not only financially challenging but also legally complex. Although it may not seem like it at first glance, real estate law can be closely related to family law, especially if there is community of property at stake. How can you ensure that your property purchase is safe and free from legal complications? And what are the risks if you make a mistake in the process?
What is community property (SJM) anyway?
At the outset, it's certainly worth clarifying what SJM is. In the most general terms, it can be said that community property is created upon marriage and includes all property acquired during the marriage by either spouse, except for gifts, inheritances or property acquired with the sole funds of either spouse.
As a rule, real estate purchased during the marriage automatically becomes part of the spouses' community property (unless there are specific cases, which we will discuss more in the next article). At the same time, it is important to note that, in addition to the property, liabilities incurred during the marriage (e.g. a loan in connection with the purchase of the property which finances the purchase price or part of it) generally become part of the matrimonial property.
For the purposes of this article, we will assume a model situation where one of the spouses acts on the buyer's side, where the spouses have not regulated the SJM differently from the "basic" statutory regime, and this is a standard case where the property would automatically be included in the SJM.
What if only one spouse signs the purchase contract for the property?
Thesigning of a contract of sale for a property by only one spouse can bring significant risks and complications. Generally, this situation should not arise at all with careful preparation, as it should always be checked when preparing the contractual documentation whether the party to the contract on the buyer's side is married and whether the property will be acquired in the community property.
In practice, however, it may happen (especially if the contracting parties prepare the purchase contract themselves and are unaware of the potential risks involved) that the purchase contract is signed by only one spouse. Such a situation can have unpleasant consequences for all parties involved.
The worst scenario that can arise is when one spouse concludes a contract of sale for a property in this way without the other spouse's knowledge, or even concludes the contract despite knowing that the other spouse does not expressly agree to it.
In the event that the other spouse only becomes aware of the conclusion of the contract of sale afterwards and does not agree to the purchase, he or she has the possibility to defend himself or herself against this legal action of the other spouse. The consequence may then be (simply put) the nullity of the purchase contract and the "annulment" of the entire purchase of the property. Such a situation is then extremely unpleasant for both the buyer and the seller.
At the same time, it could also lead to a situation in which the seller could be entitled to compensation against the buyer (e.g. if the buyer, despite the seller's enquiry, conceals or denies that he/she is married and that the property is to be acquired in the jointly owned property, if he/she claims that the other spouse agrees to the purchase, etc.).
Furthermore, if the Land Registry, in the course of its activities, finds out that the buyer is married, it could be asked to provide a reason why the ownership of the property should be vested in only one of the spouses.
Caution - neither the signature of the purchase contract by only one spouse nor the registration in the Land Registry against one spouse (in general) means that the property does not belong to the community property!
It is important to remember that even if only one spouse signs the contract and even if the ownership of the property is registered in the land register against only one spouse, the property will still belong to the community property.
Thefact that only one spouse signs the contract, and the registration on the title deed will also be made against only one spouse, does not (generally) mean that only one spouse actually owns the property. This is often an unpleasant discovery for one of the spouses only in the event of a divorce and the related settlement of their community property.
So how to avoid any inconvenience?
In order to avoid potential problems, it is essential that both spouses agree to the purchase of the property. Ideally, of course, this means that both spouses will sign the purchase contract and the property will also be registered in the Land Registry as belonging to the buyers' joint property.
If this is not possible for any reason, or if the purchase contract has already been signed by only one spouse, the spouse who has not signed the purchase contract must give his/her written consent to the conclusion of the purchase contract. This will avoid any problems in the future when the purchase contract may be contested by the other spouse.
What can you take away from the above?
- When preparing the contract documents, make sure to carefully prepare and verify whether or not the buyer is married and whether the property will be acquired in a jointly owned property.
- If the buyer is married, ensure that the purchase contract is signed by both spouses. If this is not possible, have them sign a written consent to the purchase agreement in advance.
- The conclusion of the purchase contract by only one spouse does not generally mean that the property will not belong to the community property.
- The fact that the ownership right is registered in the Land Register only in relation to one spouse does not automatically mean that the property is not part of the community property.
If you are planning to sell or buy a property, always ensure that the contractual documentation is carefully prepared. Incorrectly set up contracts can cause considerable complications and, in extreme cases, even invalidate the whole process of selling and buying the property.