A divorce procedure in the Republic of Croatia is regulated by the Family Act (Official Gazette 103/15, 98/19, 47/20, 49/23, 156/23; hereinafter referred to as “FA”). One of the possible ways to dissolute a marriage is divorce. Divorce can be requested by one spouse through a lawsuit, or by both spouses through a proposal for an amicable divorce. The husband cannot file for divorce during the wife’s pregnancy or until the child reaches the age of one, which is the only limitation on the right to file for divorce.
If the spouses have not reached an agreement on aspects of divorce, including property division, the court will determine this by judgment. Parties can prevent conflicts over property matters by entering into a prenuptial agreement before marriage. However, if the parties have not done so, property division after divorce can become one of the most challenging aspects of the divorce process.
MARITAL PROPERTY AND SEPARATE PROPERTY
FA provides for the possibility for spouses to regulate their property relations through a prenuptial agreement that can be concluded before or during the marriage. Spouses (or bride and groom) can regulate their property relations regarding existing and/or future assets. Although trust among spouses in all aspects of their lives, including property, is commendable, the advantage of mutual regulation of property relations through a prenuptial agreement becomes evident at the time of divorce, as clearly defined provisions of such an agreement can certainly contribute to a smoother divorce, avoiding prolonged disputes and high court costs, as further explained.
If spouses have not regulated their property relations by such agreement and considering that divorce is often accompanied by emotional impulses that prevent spouses from reaching an agreement on property division, property division occurs through conflict and court proceedings. It is important to distinguish between marital property and separate property of spouses. Marital property is the property acquired by spouses through work during the marriage or originating from that property. On the other hand, gains from games of chance and economic benefits from copyright and related rights during the marriage constitute marital property. However, it should be emphasized that copyright as a strictly personal right of the author does not constitute marital property, but only economic benefits as income from the copyrighted work.
Property acquired through work during the marriage is a clearer concept and therefore generally requires less difficulty in determination in practice. However, the concept of property arising from property acquired through work during the marriage can be challenging to prove, depending on the circumstances of the case. According to case law, an example of marital assets arising from property acquired through work during the marriage would be “business shares in a company … if the company was established with money received as a gift and with funds earned by the other spouse during the marriage” according to the Decision of the County Court in Zagreb dated January 28, 2018, decision number: Gž-526/2016. Since this stems from court practice and the provision is subject to interpretation in each specific case, it is advisable to familiarize oneself with the current court practice in detail.
Additional complexity in determining the property belonging to spouses arises from the following. Not only the duration of the marriage is important in determination of the property acquired during the marriage, but also the duration of the marital community. Consequently, marriage and marital community are not identical concepts because marriage does not necessarily result in the immediate establishment of a marital community. The marital community includes emotional, intimate, financial, and similar relationships between spouses. On the other hand, the marital community is an inseparable part of marriage and can only exist during the duration of the marriage. The court will determine the existence of a marital community in judicial proceedings if there is disagreement about whether certain property is part of the marital assets or the separate property of the spouses. The burden of proof lies on the spouse claiming that the marital community ceased on a specific date. Otherwise, it is presumed that the marital community lasts until the dissolution of the marriage becomes final. In the case of divorce, marriage ends with the finality of the divorce judgment. Since it is crucial for the determination of marital assets whether something was acquired during the marital community, not the marriage itself, it is possible for a spouse to acquire property that will not be considered marital assets even though it was acquired while formally married. The County Court in Split also established this: “Property acquired after the termination of the marital community is not considered marital assets regardless of when the marriage was legally dissolved.” in its decision under number: Gž Ob-26/2019, dated March 27, 2019. The court considers these cases on a case-by-case basis, considering all circumstances.
On the other hand, separate property is the property that a spouse owns at the time of marriage, the copyrighted work created by a spouse, or property acquired during the marriage that does not constitute property acquired through work during the marriage or property originating from that property. For example, the legal basis for acquiring separate property during the marriage is inheritance and donation. On the other hand, property arising from separate property, according to case law, remains separate property. For example, “…business shares purchased during the marriage with own funds from the sale of own real estate do not constitute marital assets but represent separate property…” according to the Decision of the High Commercial Court of the Republic of Croatia dated February 7, 2023, decision number: Pž-3968/2022.
Distinguishing between marital assets and the separate property of a spouse is particularly important concerning ownership of real estate because the actual, extrajudicial state may differ from that in the land registry. For example, one spouse may be listed as the owner of real estate in the land registry, but it is property acquired during the marriage, and therefore, the property would constitute marital assets. Furthermore, it may be indeed real estate that constituted the separate property of one spouse that they acquired before marriage, but during the marriage, the other spouse invested in it, thereby gaining a claim against the spouse for reimbursement of the amount invested in the real estate. This was also established by the County Court in Varaždin in a decision dated October 13, 2022, decision number: Gž Ob-31/2022: “When one spouse invests in the separate property of the other spouse based on their shared life in marriage, and this basis falls away due to divorce and the departure of that spouse, then the spouse in whose property the investment was made during the marriage is obliged to reimburse the other spouse who invested in that property for the value of the benefit gained from the increase in the value of the house due to their investment and contribution.”
AGREEMENT ON THE DIVISION OF MARITAL ASSETS AND DIVORCE
Through a prenuptial agreement, spouses can also regulate the manner of dividing marital assets. For the prenuptial agreement to be valid, it must be made in writing, and the signatures of the spouses must be certified by a notary public.
If spouses have not agreed on property relations after the divorce, property relations can be regulated by a court decision. In doing so, the provisions of the FA apply, and, subsidiarily, regulations governing obligation and property law relations. If it is an amicable divorce with no disputed issues, the court will divorce the marriage in a special non-contentious procedure for divorce. On the other hand, if there are disputed issues between spouses, it is possible to initiate a contentious procedure by filing a lawsuit for divorce. If one spouse files for divorce, and the other expressly declares no objection to the validity of the claim until the conclusion of the main hearing, it will be considered that the spouses have submitted a proposal for an amicable divorce, and the proceedings will continue according to the rules for an amicable divorce. On the other hand, if one spouse withdraws from the amicable proposal for divorce, further proceedings are conducted according to the rules for divorce by lawsuit.
As previously mentioned, spouses can agree on property relations upon the termination of marriage amicably. If this issue has not been regulated by a prenuptial agreement, they can agree on the division (distribution) of marital/non-marital assets. This agreement is not regulated by family law rules but by provisions of property law on the division of joint ownership. It is important to emphasize that this is not a prenuptial agreement by its nature (which is concluded during the marriage and cannot be concluded after the marriage ends) but a special agreement that can be concluded after the marriage ends. This agreement is often referred to as an agreement on the mutual regulation of property relations or an agreement on the determination of property. Through this agreement, spouses determine joint ownership of marital assets and decide on the division of joint ownership between them.
In addition to determining joint ownership, former spouses, through an agreement on the mutual regulation of property relations, terminate joint ownership, or divide marital assets. Former spouses are free to determine the method of termination (physical division of movable property, geometrical division of real estate, division by equivalent, civil division, etc.). Since this agreement represents the legal basis title for the termination of joint ownership, an appropriate mode, i.e., a mean of acquisition of ownership, is necessary for the termination to be implemented. For movable property, this will be the transfer into possession, and for real estate, registration in land registries. For registration to be completed, the agreement must contain a clause allowing the registration of ownership rights in land registries. As for the form of the agreement, no specific form is provided, but in practice, it will often involve real estate division; therefore, for the agreement to be valid, it must be made in writing with the signatures of the parties certified by a notary pubilc.
The described method of terminating joint ownership represents an amicable method of termination where there is no dispute about what constitutes marital assets and how former spouses will divide it among themselves. On the other hand, if there is a dispute about any issue or the parties cannot agree, the court will determine the marital assets and terminate joint ownership by applying the provisions of the Property Act (Official Gazette 91/96, 68/98, 137/99, 22/00, 73/00, 129/00, 114/01, 79/06, 141/06, 146/08, 38/09, 153/09, 143/12, 152/14, 81/15, 94/17). The rule in dividing marital assets is that spouses are joint owners of property in equal parts. The rule of joint ownership in equal parts was introduced with the entry into force of the Family Act (NN 116/03), which was confirmed by the County Court in Varaždin in one case: “After the entry into force of the Family Act (OG 116/03), it is no longer debatable in what proportion a spouse contributed to the acquisition of joint property because there is a legal presumption that spouses are joint owners in equal parts of marital assets, with the court being obliged to determine what constitutes the separate property of each spouse and what constitutes marital assets.” (decision number: Gž-1517/05, dated November 10, 2005).
A lawsuit for the division of property after divorce is filed with the municipal court according to the defendant’s place of residence or the municipal court in whose area the spouses had their last common residence. When the court carries out the termination, it is primarily bound by strict legal provisions and secondarily by a valid agreement between the parties on the method of termination, if any exists, and it is also possible to have the right to termination by payment that a particular co-owner would have based on a legal transaction or the law. Since when going through court termination of joint ownership, former spouses do not have an agreement on property division, the court will apply legal provisions and divide movable property physically, and real estate geometrically. If such division would significantly reduce the value of the property being divided, the court will decide to sell the property at a public auction or by another suitable means, and the amount obtained will be distributed proportionally to the co-ownership shares (civil termination).
When co-owners (former spouses) terminate joint ownership of several properties simultaneously, the court may, upon the request of each of them, decide that, instead of dividing each individually, each of them is allocated a specific property or group of properties, proportionally to their co-ownership shares, considering their needs. If the properties allocated to an individual co-owner by such termination exceed the value of their co-ownership share, that co-owner is obliged to reimburse the other former spouse for the difference.
In conclusion, the divorce process involves the separation of property interests of spouses, which often represents a complex and demanding procedure. FA regulates the property relations of spouses, but they can regulate these relations in advance through a prenuptial agreement and prevent disputes. Understanding the difference between marital assets and separate property is crucial, as it affects the division of property after divorce. An amicable divorce allows parties to independently agree on property division, while in the opposite case, a court procedure is conducted. An agreement on the termination of joint ownership enables spouses to regulate the division of property after divorce, considering their individual needs and circumstances. A court procedure for the termination of joint ownership follows legal guidelines and may involve physical or civil division of property, depending on the circumstances of the case.