What is a Community Lien on Sole and Separate Property?
Arizona rulings have recognized the community may gain a community property lien against the sole and separate property of a spouse if either spouse, through labor, effort, or payment of community money, increased the value of a spouse’s sole and separate property or reduces the debt associated with that separate property.
One common example we see occurs when the parties choose to live in a home owned by one spouse before marriage; thereby making that house the sole and separate property of the spouse who owns it. However, the parties begin investing community money to make improvements to the home and to pay the monthly mortgage. The community, therefore, may have a community lien against the home to the extent such improvements increased the value of the home or decreased the mortgage balance owing on the home.
The second most common example of the creation of a community lien is when one spouse owns a business before marriage, and the value of that business increases during marriage due to the labors of either or both spouses or the investment of money into the business. The community, therefore, may have a lien against the business for income held within the business and the increase in the market value of the business.
There is, however, an argument to counter the community lien claim, which is to argue the community had already been fairly compensated during the marriage to the extent of the amount the court calculates the community lien to be. You may want to read a more in-depth article we wrote about the Arizona Court of Appeals case of Rowe v. Rowe.
The community may also have a community lien against the property, such as a home or business, owned by one of the spouses as his or her sole and separate property even if that property decreased in value during the Marriage. You should read our in-depth discussion of that Arizona Court of Appeals decision in the Potthoff v. Potthoff case.
The Arizona Court of Appeals in the Evans v. Evans case addressed the particular issue of whether profits earned during a marriage from a sole and separate business are community or separate property. The decision rests upon how much of the profits were due to the labors of either spouse.
Contact Our Scottsdale Arizona Community Property Attorneys
Call us at (480) 305-8300 to schedule a consultation with one of our Scottsdale Arizona Community Property Attorneys regarding Arizona community property laws or any other Arizona family law matter.