The Drahos Calculation and the Arizona Supreme Court’s 2022 Update
In September 2022, the Arizona Supreme Court considered whether the Drahos calculation should remain as the standard in Arizona for determining the value of one spouse’s sole and separate house.
The Arizona Supreme Court approved the formula and installed it as the “starting point” for calculating the equitable LienA legal claim made against a debtor's property. Generally, this comes in the form of a judgment that is then recorded on property the debtor owns. For example, if a judgment creditor gets a judgment of $10,000.00 in child support arrearages, and the judgment debtor owns a home…Read more about Lien. But where appropriate, the Court can consider other formulas or calculations. The Court’s ultimate goal is to “achieve substantial justice” between the parties.
What does the Arizona’s Supreme Court 2022 Ruling Mean for the Drahos Calculation?
It means that going forward, the Drahos calculation will remain the primary calculation for determining the equitable lien. But the Court may consider other approaches that are needed to create a fair outcome.
What is the Drahos Calculation?
This is a formula used to calculate a Community LienWhen community funds are used to pay for an asset, its loan/mortgage installments, or improvements on one spouse’s sole and separate asset, the marital community has a lien on the property. The spouse who owns that property must reimburse the other spouse one-half the amount of…Read more about Community Lien on a property. The calculation is C + [(C/B) x A] where C = contributions to principal, B = purchase price, and A = appreciation. Each spouse is entitled to half of the resulting calculation. Put another way: it requires the property-owning spouse to pay the other spouse half the community’s contributions in principal plus a percentage of the appreciation in proportion to the community’s ContributionThe name for the type of legal action (i.e., lawsuit) that gets filed when a creditor has come after one spouse for the full amount owed on a community debt, even though the Decree assigns some or all of that debt to the other spouse. Generally, both spouses are jointly liable…Read more about Contribution to the overall purchase of the home.
What else changed with this updated ruling?
The Arizona Supreme Court vacated both Court of Appeals opinions for Saba and Femiano.
We, therefore, now have a clearer picture of what happens when the community pays the down payment, the mortgage payments, and all other payments: In that situation, the Court still applies the Drahos CalculationThis is a formula used to calculate a community lien on a property. The calculation is C + [(C/B) x A] where C = contributions to principal, B = purchase price, and A = appreciation. Each spouse is entitled to half of the resulting calculation. Put another way: it requires the…Read more about Drahos Calculation unless another approach would yield a fairer result.
