Is a car, financed by financial leasing, a part of the joint matrimonial property?

Let’s assume one of the spouses concluded a financial leasing contract during the marriage and that both of the spouses were paying half of the leasing contract instalments with their monthly salaries. In the event the spouses divorce, the question of whether or not the car belongs to the joint property may arise when dividing the property. 

In the event that the lessee became the owner of the vehicle before the divorce and that the vehicle was financed from the joint property (as described above), the car in our opinion indisputably belongs to the joint property and would be divided according to the rules applicable to the division of joint property. However, if the lessee did not become the owner of the vehicle during the marriage, the car is then not (yet) a part of the joint matrimonial property. Joint matrimonial property then consists of property rights stemming from the financial leasing contract concluded during the marriage. 

As obligations arising from the concluded leasing¹ contract are binding on both spouses, the rights arising from the leasing contract (and herewith a right to buy the car) also belong to both spouses. Such an “investment” by the spouses should therefore be appropriately taken into account in case only one of the spouses bought the vehicle (as the subject of leasing) and registered it as his or her property. We believe that in a case such as this account should be taken of how much was invested in the acquisition of the vehicle from the joint matrimonial property (which should not only include the payment of redemption value of the vehicle, but also previously paid instalments in the appropriate scale) and how much from the special property of the spouses. 

In assessing whether something belongs to the joint matrimonial property, case law has taken a position that the time of the acquisition of the property is relevant. In one particular case the Court ruled that the vehicle belonged to the property of the spouse, which took ownership of the vehicle after the divorce². We are of the opinion that such a view is too narrow as it overlooks the fact that, when assessing title to the vehicle, payment of the last leasing instalment is not the only relevant thing; prior instalments made by the lessee in repaying (or buying) the vehicle also warrant consideration. 

The spouses can certainly save themselves the hassle of this legal conundrum by agreeing in advance how they would divide jointly created assets and joint obligations. 

Author: Manca Vrtačnik, Associate