The Supreme Court of Florida Finds Passive Appreciation To Be A Marital Asset

In its recent decision in Kaaa v. Kaaa, the Supreme Court of Florida found the passive appreciation of the parties’ marital home to be a marital asset, even though it was purchased prior to the marriage and titled only in the husband’s name.  The trial court in Tampa, Hillsborough County, initially found the appreciation to the home to be Husband’s sole asset and that the wife would only be entitled to one-half of the reduction in the mortgage and renovations to the home.  The Second District Court of Appeal affirmed the lower court’s decision, but certified a direct conflict with a ruling from the First District Court of Appeal.

The Supreme Court of Florida, quashed the district court’s opinion and found the passive appreciation of the home to be a marital asset subject to equitable distribution when marital funds and/or efforts were used to pay the mortgage and increase the equity).  In Kaaa, the Court set forth a five-step approach to determine whether the passive appreciation of the home should be considered a marital asset.  First, the court is to determine the fair market value of the home.  Second, the court must determine if there has been passive appreciation in the value of the home.  Third, the court must find that the passive appreciation is a marital asset pursuant to Section 61.075, Florida Statutes (i.e. whether marital funds were used to pay the mortgage and the non-owner spouse made contributions to the home).  Then, the court must determine what extent the contributions had to the appreciation of the house.  Fourth, the court must value this passive appreciation.  Fifth, and finally, the court must then calculate how the appreciation should be allocated.

Of interest, is how the courts will allocate passive depreciation in a non-marital asset, especially in this difficult housing market.