If a couple owns a home, and starts a divorce, it is not uncommon for one of the spouses to stay in the house, and for the other to move out. Follow up questions then come in to play. Who pays for the house. What payments are included, i.e., mortgage, property taxes, utilities, etc?
Watts (In re Marriage of Watts (1985) 171 Cal.App.3d 366) is a famous California family law case. Essentially it stands for the proposition that the spuse who stays in the house should pay the community rent for that privilege. In just about every family law case that a lawyer will handle, if that lawyer is representing the spouse not living in the house, his or her client will insist in Watts charges. As a practical matter courts rarely rarely invoke Watts charges. It is one of those examples of judicial decision making that we lawyers know when we see it. The decision is left to the discretion of the judge, which means it becomes a guessing game. That is why the Carlos case out of Ventura County is so interesting. In the unpublished case Watts charges are ordered.
Gloria and Salvador were married for 42 years before Gloria filed a petition for dissolution of marriage in July 2006. Their actual separation date was determined to be in 1996. The couple owned a four-bedroom, two-bath family residence in Ventura. They also owned a piece of propety in Kern County that had a 22 foot trailer on it. Some time after 1996 Salvador moved out of the Ventura house and into the Kern County trailer. At trial it was determined the the Ventura house had a fair rental value of $1,800 per month, and that the fair rental value of the Kern County property was $300 per month. At the trial both parties requested that the other bed charged with Watts credits.
With respect to Watts credits, the court said: “Husband is requesting Watts credits for Wife’s exclusive use and possession of [the family residence] since 1996. Wife argues that she did not have sole use and possession because Husband would come to the house an average of 2 days a week to bathe, wash his clothes, etc. The evidence supports Husband’s position. Wife testified that after Husband left she moved his things onto the patio. She made changes to the house. Husband had use of one room while he was there to wash his clothes [and] bathe. After Husband left, Wife moved her adult children into the house, and more recently her grandchildren.”
Based on Salvador’s use of one room in the Ventura residence for two days a week, the court reduced the fair rental value of the Ventura residence by $300, from $1,800 to $1,500 per month. The court awarded Salvador Watts credits of $750 per month for Gloria’s use of the Ventura residence. Gloria was awarded Watts credits of $150 per month for Salvador’s exclusive use of the Kern County property, for a net credit to Salvador of $600 per month, or $96,000, for the period September 1996 to December 2009.
On appeal, Gloria contends, as she did in the trial court, that the award of Watts credits to Salvador was improper because Gloria did not have sole and exclusive use and possession of the Ventura residence during the period of separation.
The Court of Appeals upholds the decision of the trial judge.
In equalizing the division of community property, the trial court has the authority to reimburse the community for the value of one spouse’s exclusive use of a community asset between the date of separation and the date of trial–commonly referred to by the family law bench and bar as a Watts credit or Watts charge. (Watts, supra, 171 Cal.App.3d at p. 374; see In re Marriage of Bell, supra, 49 Cal.App.4th at p. 311; see generally Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2011) ¶ 8:855, p. 8-213.) Thus, “[w]here one spouse has the exclusive use of a community asset during the period between separation and trial, that spouse may be required to compensate the community for the reasonable value of that use.” (In re Marriage of Garcia (1990) 224 Cal.App.3d 885, 890.) The rationale for Watts charges is that they help achieve an equal distribution of the community estate, by allocating credits to one party for the other party’s exclusive use of a community estate after separation. (In re Marriage of Duncan (2001) 90 Cal.App.4th 617, 631-632.)
There are no specific guidelines for determining when Watts charges should or should not be awarded. Rather, the trial court has broad discretion and must consider all the circumstances when determining whether it is equitable, fair, and reasonable to order reimbursement in a particular case. (Watts, supra, 171 Cal.App.3d at p. 374; In re Marriage of Braud (1996) 45 Cal.App.4th 797, 818-819.) We conclude the trial court was within its discretion in awarding Watts charges.
Does the Carlos case make predicting Watts credits any easier? No. But at least it shows us how the precedent can be applied.
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