Valuation of foreign real estate in Connecticut divorce litigation

On Behalf of | Jan 14, 2022 | Real Estate Interests

It can be a challenge to establish the value of real estate in a foreign country from a distant U.S. courtroom. Judges face this issue in contested divorces when one or both litigants own land, homes, other buildings or commercial real estate overseas. The court needs evidence of value to make an equitable division of marital property.

This question may be even harder to answer during the current pandemic that can limit international travel, but Connecticut courts have broad powers to craft solutions to this kind of valuation question.

Lessons from Owusu

In 2008, the Superior Court of Connecticut in the Judicial District of Hartford issued an unpublished but instructive opinion in Owusu v. Owusu, 2008 WL 590373 (unreported 2008), a divorce case concerning valuation of parcels of real estate in Ghana.

As part of a divorce action the Connecticut court has broad, equitable power and discretion to divide marital property fairly. This empowerment is based on its jurisdiction over the divorce, the parties and their marital property. The power to assign property interests of either litigant to either of them extends to their property wherever located, even to that which is in another country.

Connecticut’s “all-property” equitable distribution system defines the marital estate relatively broadly as anything owned by either spouse alone or jointly, obtained before or during the marriage. Accordingly, two of the Ghanaian parcels were marital property. The husband owned one before marriage and while married, they erected a building on it. The second parcel they bought during the marriage. (A third parcel was clouded by an ownership dispute raising different issues.)

How does the court determine real estate values?

In Owusu, the court elaborated on the judge’s broad discretion to choose an “appropriate method for determining the value of the property.” Quoting Turgeon v. Turgeon, 190 Conn. 269 (1983), the court said that the judge makes valuation findings by weighing the evidence from appraisers and their appraisal methods, the parties and the judge’s “own general knowledge of the elements going to establish value …” The court chooses the “most appropriate” valuation method and will only be reversed on appeal if it “misapplies, overlooks, or gives a wrong or improper effect to any test or consideration which it was his duty to regard.”

An important rule

Owusu emphasizes that a property owner may testify as to the reasonable value of their own real property without being qualified as an expert. The opinion quotes liberally from Connecticut Practice Series: Family Law and Practice With Forms, noting that the rule is strict – only the spouse who owns the property may testify to value. If one litigant has no ownership interest in a parcel because the other spouse owns it, the nonowner spouse may not testify to value.

Ownership qualifies a spouse to testify about value because they are familiar with the property, its condition and its worth as well as values of similar properties nearby. This can be particularly helpful for foreign real estate. An appraisal or other measure of real estate value like a government tax valuation may be difficult to obtain due to remoteness of the parcel, language barriers or difficulty of working with foreign authorities.

A caveat

Again citing Connecticut Practice Series, the opinion warns that while using an owning party’s “guestimate” of their property value in divorce is accepted by our courts, this can be “very subjective and often highly inaccurate.” If a future property sale is part of the divorce order, using the guessed value is not harmful if the parties will split the proceeds using a fraction, but if the order uses a specific value (spouse 1 gets $10 million and the rest to spouse 2), if the guess was far off the mark, one litigant’s share may be unfair.

Ultimately, the judge will decide what weight the owner’s testimony as to value will carry. In the case of overseas real estate, not every owner will be equipped to testify accurately about valuation, especially for commercial real estate or extensive private holdings.

Finally, there may be rare occasions when a nonowner (and nonexpert) might be allowed to testify as to value. For example, in Porter v. Thrane, 98 Conn.App. 336 (2011), the court mentioned a case where the former owner of a real estate parcel was allowed to testify about its value and another where a judge let the son of an oyster business owner testify about the value of an oyster bed.

This opens the door a crack to the possibility of testimony from a nonowner, nonexpert who could shed light on the value of foreign real estate. Perhaps because of the scarcity of relevant evidence, the court might consider other relevant sources since its discretion is so broad. Legal counsel will be able to analyze the available evidence and potential for such an argument. Of course, a litigant may call its own expert witnesses such as appraisers or other real estate professionals, although the location of the realty abroad makes this a more arduous effort.

What other evidence of value could be relevant to the court?

The judge in Owusu gives advice about potentially relevant evidence of valuation of foreign real estate:

  • The litigants could agree on a local appraiser abroad and stipulate to accept their valuation.
  • Either litigant could retain an appraiser and bring them to Connecticut for live testimony.
  • The parties could agree to average the valuation amounts of two appraisers.
  • They could agree on a valuation figure.

In Desai v. Desai, 119 Conn.App. 224 (2010), the appellate court held the trial judge had properly considered an appraisal submitted by one of the litigants, the litigants’ opinions about valuation and the judge’s own knowledge about market decline.

While this concerned Connecticut real estate, it suggests that a state judge might consider a foreign appraisal on paper without the appraiser’s live testimony. The court’s wide discretion in admitting evidence of real estate value allows litigants and their divorce attorneys to think creatively about how to produce relevant evidence of foreign asset value. For example, in this time of more flexibility because of the pandemic, a judge may agree to hear the testimony of a foreign appraiser via a video platform.

Finally, the judge may select and appoint an expert witness if they feel they require further evidence of valuation. See Connecticut Practice Book 2022, Sec. 25-33. Especially for foreign real estate of high value or complexity, a litigant should work with an experienced and knowledgeable lawyer to determine what available evidence of valuation would be most helpful to the judge. While getting such evidence may be difficult for foreign real estate, the decision to do so may be right for some litigants.

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