Apartment Price Doubled After De Facto Marriage Breakdown... How to Handle 'Property Division'?

Supreme Court Rules "Property Division Lawsuit to Use Market Value at 'End of Trial'" for the First Time
Court States "De Facto Marriage Property Division Based on Marriage Termination Like Legal Marriage"

The Supreme Court has issued its first ruling on when to set the reference date for the amount of property division for real estate whose market price has skyrocketed during the trial, when a couple in a de facto marital relationship divorces and files a property division lawsuit.

Wife A and husband B officially registered their marriage and lived as a married couple, but in February 2006, they agreed to divorce to avoid additional capital gains tax and continued cohabiting in a de facto marital relationship. However, conflicts arose, and their de facto marriage broke down. After their de facto relationship ended, a property division issue arose over two apartments they had purchased together with money accumulated during both their legal and de facto marriages. Wife A filed a property division lawsuit against husband B in December 2013. Four years passed from the first trial to the second trial verdict, during which the actual transaction price of the two apartments doubled to 1.8 billion KRW as of the conclusion of the second trial's pleadings.

The courts differed on whether the amount of property to be divided should be based on the apartment prices at the time the de facto marriage ended, before the price surge, or at the time the pleadings concluded in the property division lawsuit after the price surge. The first trial ruled to divide the property based on the apartment prices at the time the de facto marriage ended, but the second trial ruled to divide it based on the prices at the final conclusion of pleadings. According to the legal community on the 1st, the Supreme Court’s First Division (Presiding Justice Oh Kyung-mi) recently upheld the second trial’s ruling.

In this case, the Supreme Court made two first-time rulings. First, it held that a de facto marriage, like a legal marriage divorce by agreement, should set the amount subject to property division based on the date the marital relationship ends. However, if there are special circumstances such as a sharp rise in real estate prices during the divorce lawsuit, the amount of the property should be determined based on the date the pleadings conclude, not the date the marital relationship ended.

The court stated, "In cases where special circumstances exist that would result in an outcome significantly inconsistent with the purpose of the property division system?which is the fair liquidation and distribution of marital property?such as attributing gains or losses arising from real estate formed or maintained through joint efforts during the marriage to one party after the de facto marriage ends and before the conclusion of the trial on the property division claim, these circumstances may be taken into account when calculating the value of the property subject to division."