California is a community-property state, and any assets acquired during the marriage belong to both spouses equally. In 1985, a landmark case—Marriage of Watts (1985) 171 Cal. App. 3d 366—set a precedent that is followed in many California divorce cases. In the Watts case, it was determined that a party who has full use of a community asset may have to reimburse a spouse for the use of that asset. In plain English, this means that the spouse who lives in the marital home during separation may have to pay rent to the other spouse. The reimbursements are known as Watts charges. The following is a typical scenario:
Josh and Lacy have been married for twelve years and have three children. Josh has been having an affair with a younger woman. He decides to move out. Lacy stays in the home with the children. Josh agrees that this is for the best. The children should have as much stability as possible during the separation and divorce.
Josh soon realizes that he is going to have to pay quite a bit of child support. He becomes annoyed at Lacy. He decides that she should pay rent for living in the house. There is no mortgage, and the fair rental value of the home is $6,000. Josh decides that he should be reimbursed $42,000 for the fourteen months that Lacy and the children have lived in the home alone.
Fortunately, the Court has the final discretion on Watts charges. The court will consider many factors, including the fact the Josh voluntarily left the home, that Lacy was caring for the three children, the amount of the mortgage, the amount of support being paid, and whether Lacy had advance notice of Josh’s intent to pursue Watts charges.
If you are paying the mortgage, utilities, repairs, and other costs associated with the home, Watts charges may be offset with Epstein credits. Epstein credits are reimbursements made for payment of community debt.
It is important that you be aware of these potential charges and that you plan your separation accordingly. Our San Francisco divorce attorneys can help. The divorce lawyers at The Law Offices of Paul H. Nathan are dedicated to helping women protect their families and their interests during separation and divorce. To schedule an appointment, call us at 415-341-1144.