Selling or Transferring an Apartment on Divorce
The family home is usually the main asset in dispute, and how it is dealt with affects the tax, the mortgage and where the children will live. The three usual routes are not equivalent in law, and the difference between them is settled before the divorce agreement is signed.
Three routes, not one
Where a couple separates and owns an apartment, there are three main courses of action, each with a different legal and tax outcome:
- Transfer of one spouse share to the other, so that one stays in the apartment and compensates the other.
- Sale of the apartment to a third party and division of the proceeds.
- Continued joint ownership for a defined period, for example until the youngest child reaches a set age.
The choice is not only a matter of preference. It depends on whether the spouse staying can finance it, on the bank position regarding the mortgage, on each party tax position, and on the children needs. What is written into the divorce agreement is what settles all of these, so the checking is done at the drafting stage.
Transfer incident to divorce
Section 4A of the Real Estate Taxation Law provides that a transfer of rights in an apartment between spouses, made under a judgment given in the course of divorce proceedings, is not treated as a sale for the purposes of the Law. The transfer itself therefore carries neither capital gains tax nor purchase tax.
The provision also covers a transfer from the spouses to their children, and it does not require the whole proceeding to have concluded. A judgment suffices, including a partial judgment or a divorce agreement given the force of a judgment.
Two important additions: the provision applies whether the transfer is made with or without consideration, and since the transfer is not treated as a sale, it also requires no filing with the Land Taxation authority. What is required is completing the registration of the rights, as set out below.
This is deferral, not forgiveness. The spouse receiving the rights steps into the shoes of the transferor: on the day he or she sells the apartment, the acquisition date and acquisition value are the original ones, from the joint purchase. The gain accrued across all those years is attributed to that spouse. For a property bought before 2014, beneficial linear apportionment may also apply.
A transfer in the opposite direction, from a child to a parent, does not fall within the provision.
Sale to a third party
Where the couple sells the apartment to an outside buyer, this is not a transfer incident to divorce but an ordinary sale in every respect. The usual capital gains rules apply, and each spouse entitlement to an exemption is examined separately, according to how many apartments that spouse owns and which exemptions have been used.
This is where the family unit comes in. So long as the spouses are married and living together, they are examined as one seller for the sole apartment exemption. After separation the picture changes. The timing of the sale relative to the stages of the proceeding may therefore affect the liability, so the apartment should not be sold before each party exemption position has been checked.
Partition and the children housing
Where there is no agreement, any co-owner may seek partition of the property. But for a couple family home there is a special provision.
Section 40A of the Land Law provides that the court will not order partition by way of sale until it is satisfied that alternative accommodation suited to their needs has been provided for the minor children of the couple and for the spouse who has custody of them, including a payment arrangement according to the means of the couple.
The practical consequence: where the children will live is not a side issue in the proceeding but a precondition to carrying out the sale. An alternative housing arrangement is sometimes the key to the whole settlement rather than an appendix to it.
What happens to the mortgage
This is where many agreements get stuck. The bank is not a party to the divorce agreement, and the agreement releases neither spouse from the obligation owed to it. While the mortgage stands in both names, both remain liable to the bank, even if the agreement says only one of them will pay.
The three practical options are full repayment of the loan, refinancing in one spouse name subject to the bank approval and an affordability assessment, or sale of the apartment with the loan repaid out of the proceeds. Confirm in advance that the bank is willing to release the departing spouse, because that consent cannot be assumed.
The life policy attached to the mortgage and any guarantors need checking too. A spouse who has left the property but remains a guarantor or an insured party stays exposed years after the divorce.
What each spouse's share of the home is worth
When one spouse stays in the home and compensates the other, the first question is what exactly is being bought. The answer follows from the property regime that governs the couple. For couples married from 1974 onwards, the Spouses (Property Relations) Law applies. Under it the home is not jointly owned during the marriage; instead, on dissolution each spouse is entitled to half the value of everything accumulated during the marriage, after deducting debts. This is the balancing of resources.
In practice the home enters the balance together with every other asset: savings, pension rights, the car, and the debts. The spouse who stays does not necessarily pay half the home's value in cash. Sometimes the other spouse's share of the home is offset against assets that remain with them, and sometimes a payment schedule is agreed. The value is set by a licensed real-estate appraiser, and the agreement should fix the valuation date, because the value at separation and the value at signing may differ.
Two sections of the law bear directly on the home. Section 8 empowers the court, in special circumstances, to order an unequal division and to set a different valuation date. Section 5A allows a spouse to ask for the balancing before the marriage is dissolved: once a year has passed since a petition for dissolution or a property claim was filed, or once the spouses have lived apart for a cumulative nine months out of twelve. The court may shorten these periods in special circumstances, including violence. A spouse who wants to realise their share of the home is therefore not dependent on the other spouse agreeing to the divorce itself.
For couples married before 1974, and for unmarried partners, the case-law presumption of community property applies instead, and the home is usually treated as jointly owned in equal shares. A valid prenuptial or property agreement overrides both regimes.
A home owned before the marriage, or received as a gift or inheritance
Not every home enters the balance. Section 5(a)(1) of the Spouses (Property Relations) Law excludes assets a spouse owned on the eve of the marriage, and assets received during it by gift or inheritance. A flat one spouse bought before the wedding, or received from their parents, remains that spouse's alone under the default rule, even if the couple lived in it for years.
That rule is not the end of the road. The case law recognises specific sharing in an external asset: a home outside the balance may still be treated as joint if an intention to share it is proven. The doctrine was settled by the Supreme Court in Family Appeal 1398/11, which requires "something more" beyond the marriage itself and shared residence. What counts as something more: the other spouse's financial participation in the purchase, in a substantial renovation or in the mortgage payments; representations and promises by the registered owner; joint management of the property; and a long marriage in which the couple treated the asset as shared. A 2024 Supreme Court decision stressed that a concrete intention to share the specific asset is required, not a general atmosphere of sharing.
The practical implications run in opposite directions. A spouse who brought the home into the marriage and wants to keep it should avoid conduct that signals sharing, or settle the matter in advance in a property agreement. A spouse who invested in the other's home should document the investment and the representations at the time, not after the fact. A dispute over an external home tends to be a long one, and a property agreement prevents it.
Until the home is sold: occupancy, expenses and use fees
Months often pass between separation and the sale or transfer, and during that time one spouse lives in the home and the other does not. Three questions come up every time.
Who pays the mortgage and the running costs. Towards the bank, as explained above, both. Between the spouses, the accepted rule is that the running costs of living in the home, including municipal tax, building fees and utilities, fall on the spouse who lives there, while the mortgage payments are a matter for agreement or for the court. The court takes into account mortgage payments made by one spouse alone as part of the overall accounting, so every payment should be documented.
Use fees. Section 33 of the Land Law provides that a co-owner who uses jointly owned property owes the other co-owners reasonable payment for that use, in proportion to their shares. The case law qualifies the rule between spouses: use fees are generally awarded when the spouse who is not living in the home was prevented from using it, not when they left of their own accord. A spouse who left because of violence or because living together had become impossible may be treated as having been prevented, but must prove it. The amount is derived from the fair rent for the property, according to the claiming spouse's share.
Who decides what happens to the home. As long as the home is jointly owned in equal shares, neither spouse may let it, mortgage it or make a substantial alteration to it without the other's consent. A unilateral step of that kind can generate a further claim and delay the sale. A short interim agreement that fixes who lives there, who pays what and for how long usually spares the couple a second dispute on top of the first.
The order of steps
- Establish the state of the rights: registry extract, mortgage, attachments and notes.
- Check each party tax position separately: number of apartments, exemptions used, and holding period.
- Get the bank position on refinancing or release, before the agreement is closed.
- Draft the clause in the divorce agreement so that it fits section 4A, if that is the route chosen.
- Have the agreement given the force of a judgment, which is the condition for the provision to apply.
- Complete the registration promptly after the judgment. A transfer meeting the conditions of section 4A is not treated as a sale and so requires no filing with the Land Taxation authority, but without registration it is not complete.
A divorce agreement drafted without checking the tax and the mortgage can turn out to be unworkable exactly at the point where both parties have already relied on it.
The registration itself. For a property registered at the Land Registry (Tabu), one files with the registry the divorce agreement given the force of a judgment, a municipal certificate confirming no outstanding property tax or levy debts on the property, and any further documents the circumstances or the registry require. At the end an updated extract of registration is issued, which is the evidence that the transfer has been completed. A property registered not at the Land Registry but with the Israel Land Authority or a housing company is settled with that body, which issues the confirmation that the transfer is complete.
Before you sign, talk to us. Our office drafts the agreement for you, conducts the negotiation and represents you through to completion of registration. Our real estate department has accompanied transactions for over 15 years, alongside an architect, a surveyor and a property valuer. Call 02-5953322, send a WhatsApp message to 050-4411343 or leave your details in the form below, and we will get back to you as soon as possible.
What people ask most often
Is a transfer of the apartment to a spouse entirely tax free?
Does the divorce have to be finalised for the provision to apply?
We sold the apartment to a third party as part of the divorce. What applies?
My spouse refuses to sell. Can partition be forced?
The agreement says only one of us pays the mortgage. Is that enough?
The home is registered in my spouse's name only. Do I have a share in it?
Can the home be divided before the divorce is finalised?
I left the home and my spouse stayed. Am I entitled to use fees?
Who decides what the home is worth, and as of which date?
All pages in the Family and Inheritance department
The separation itself
The divorce processLeaving home before divorceReconciliation or divorceRequest for dispute resolutionDissolution of marriageEconomic abuseRestraining orderBreach of a divorce agreementThe children
Child supportChild support claimIncreasing or reducing supportSupport for a child born outside marriageCollecting support through National InsuranceSpreading a maintenance debtCustody and parenting timeShared parentingThe tender years presumptionChanging a custody arrangementRelocating abroad with the childrenParental alienationDealing with an alienating parentGuardian ad litemSurrogacyPaternity claimThe Youth (Care and Supervision) LawVisual parenting plan builderProperty and agreements
Prenuptial agreementSame sex prenuptial agreementSame-sex marriageNotarised prenuptial agreementDissolution of joint ownershipCareer assets and goodwillSelling the apartment on divorceCommon law partnersInheritance and estate planning
Wills and inheritanceInheritance between same-sex partnersEstate planningWills in estate planningIntergenerational transfer in estate planningTrustsDynasty trustSpecial needs trustInheritance orderProbate orderAgreements between heirsInheritance disputes between siblingsContesting a willNo-contest clause in a willBefore the divorce agreement is closed
Tell us where the apartment stands: whose name it is in, whether there is a mortgage, how many apartments each of you owns, and whether there are minor children. The tax and the mortgage are checked before the drafting, not after it.