Dispute & Resolution

Whose house is it?

Background

In 2006, Carol and Max were divorced. Carol prepared all of the papers by using Utah Court Self Help website. The divorce decree says their house should be sold and Carol and Max should share the proceeds.

Max moved to the Midwest and Carol continued to live in the house. For 13 years Carol made the mortgage payments, including property taxes and insurance, and she paid for all of the repairs to the house, including a new roof, a new hot water heater and furnace repairs. In late 2018 when Carol tried to refinance the house, the banker told her she qualified for the loan but the refinance could not be approved without Max’s signature.

Carol contacted Max and asked him if she could buy out his interest in the house. Max agreed, but he wanted much more money than Carol thought was fair.

Ultimately, Carol hired an attorney who filed a Petition to Modify the Decree asking the court to award the house to Carol subject to Max’s equity interest. Max hired an attorney to enforce the decree and force the house to be sold so he could get his equity interest. Max and Carol through their attorneys exchanged what they thought were relevant documents and their attorneys scheduled the court-mandated mediation with me.

Discussion

Carol, her attorney and Max’s attorney met in my office. Max participated by conference call, since he lives in the Midwest. Carol brought copies of mortgage statements, property tax statements, receipts for repairs and maintenance expenses.

Max’s attorney brought a Zillow report and Max said that Carol rented out rooms in the house and he should be entitled to half of the rental income. Carol agreed; her daughter and granddaughter have lived with her for the past 34 months and her daughter pays $500 per month rent, which includes utilities, cable and internet.

Carol believes the fair market value for the house is $330,000. Max believes its value is $425,000. Since the parties could not agree on the value of the house, they agreed to have the house appraised and return to mediation in 60 days. They also agreed to be bound by the averages of their respective appraisals.

The parties returned to mediation with their appraisals and without their attorneys. Carol attended in person and Max by conference call. As it turned out, the average value of the house was $348,500.

Carol produced an accounting of rental income, utility bills and bills for cable and internet along with a spreadsheet showing that the average net rental income over the past 34 months was $365.50. Max said Carol’s daughter and granddaughter should not be responsible for any of the cable and internet costs because those costs do not go up by usage and Carol would have this expense with or without a renter.

Max said it was not reasonable to think that Carol’s daughter and granddaughter caused her utilities to increase by 66 percent and they should not be responsible for two-thirds of the utilities. Carol did not have any information to show that her utilities increased 66 percent when her daughter and granddaughter moved in with her.

After significant discussion, Carol and Max agreed that net rental income is $425 and that Max is entitled to half of the rental income.

Resolution

The parties agreed Carol would receive credit for paying Max’s share of the mortgage, taxes, insurance, maintenance and repairs, and Max would receive credit for his share of the rental income. With the agreement, the divorce decree could be modified and Carol could refinance the house and buy out Max’s equity interest.

Mediator Notes

In hindsight, it is easy to say that Carol and Max could have reached an agreement without their attorneys or even without a mediator, but this is probably not true. Their attorneys set them up to be in a position to reach an agreement, and mediation gave them an opportunity to discuss their opinions in a productive manner that resulted in an agreement.

The time spent in the first mediation was two hours and the second was 3.75 hours. Carol and Max equally paid the total mediation time of 5.75 hours at $250 per hour.

If you have a dispute you would like me to consider in this column contact me at: 801-994-6000 or [email protected].