How to divide the rental income of the factory building after Ningbo divorce

Mr. Chen rented a factory building in his own name before marriage. After marriage, he used the joint property of the husband and wife to pay the security deposit and put it into renovation. After the divorce, the factory continued to be sublet for profit, and his ex-wife sued for dividing the rental income from the divorce to the expiration of the lease. The conclusion first: after divorce, the sublease income generated by one party's continuing operation and management of the leased property is generally recognized as the party's personal property and is not divided as the joint property of husband and wife-because the other party has not invested funds, participated in management, did not bear risks and made no contribution to the income after divorce; but the sublease income actually obtained in marriage and the value of the lease right itself formed in marriage, remaining common property may be divided or compensated at a discount. Similar disputes are not uncommon in Ningbo manufacturing families, and this paper disassembles the legal basis, time period splitting method and evidence points.

1. legal basis: income trisection and personal property post-marital income rules

Item 2 of Article 1062 of the the People's Republic of China Civil Code lists "the income from production, operation and investment" as the joint property of husband and wife, which is the direct basis for the division of the income from sublease within marriage; Article 1063 reserves one party's premarital property and "the property determined to belong only to one party in the will or gift contract" as personal property. Regarding the post-marital income of personal property, Article 25 of the Interpretation (I) of the Supreme People's Court on the Application of the Marriage and Family Code of the the People's Republic of China Civil Code lists "the income obtained by one party through personal property investment" as "other property that should be jointly owned." Article 26 further clarifies: "The income generated by the personal property of one spouse after marriage, except for the fruits and natural appreciation, shall be recognized as the joint property of the husband and wife."

The Three-Part Method for Analyzing Property Income: In both theory and practice, property income is classified into three categories—investment income (the return derived from investing time, effort, capital, and assuming risk), fruits (natural produce such as rental income or naturally occurring yields), and appreciation (including both natural appreciation and actively managed appreciation). The rule for interpreting article 26 of the (I) is that only "fruits" and "natural appreciation" of personal property after marriage remain with the individual, while the rest (investment income, active appreciation) are recognized as common property. The scene of the factory building lease: the lease right and sublease income formed by paying the security deposit and investing in the joint property of the husband and wife during the marriage reflect the joint efforts of the husband and wife and belong to the joint property; The income generated by one party's independent operation after divorce belongs to the party's personal operating income and does not belong to the joint property of the husband and wife-this is the legal principle that the ex-wife "cannot share the rent after divorce.

2. case subdivision: time period and contribution determine the division range

situation one: the income of sublease actually obtained in marriage. The income generated during the period of deposit, rent and management of the joint property of the husband and wife belongs to the joint property of the husband and wife and shall be divided in the event of divorce -- the evidence is the collection record, sub-lease contract and accounts during the lease period of the marriage.

Case 2: Sublease proceeds from the divorce to the expiration of the lease term. After the divorce, the two parties no longer live together, if the income depends on one party to continue to invest time, energy, capital and bear business risks (rent collection, maintenance of the plant, handling sub-lease disputes, payment of water and electricity taxes), it belongs to the party's personal management income, the other party does not contribute that is not involved in the distribution.

Case 3: The income that has been determined in marriage and does not need additional business after marriage. If the rental income stipulated in the lease contract has been determined during marriage and is only of the nature of "due collection" after divorce (e. g. the creditor's rights that have been determined to belong under the long-term fixed rent agreement), this part may be recognized as interest or determination of creditor's rights, and can still be divided as common property-the key depends on whether one party still needs to put into operation for the acquisition of income.

situation four: the value of the lease right itself. Although the lease right is not ownership, it has the value of use and income, and if the lease right is formed within the marriage and has a transferable or discounted market value (e. g. a long-term lease that is significantly lower than the market price), the other party may claim compensation for the value of the lease formed within the marriage, rather than directly dividing the future rent.

Scenario 5: If the divorce agreement contains provisions, those provisions shall prevail. If the two parties expressly agree in the divorce agreement that the rental income after the divorce shall be attributed to one party or distributed proportionally, it shall be dealt with according to the agreement.

3. operational steps and evidence list: first split the time period, then calculate the contribution

The first step is to sort out the lease contract: collect the lease contract, security deposit receipt and rent payment records, specify the lease period, rent standard and security deposit amount, and lock the demarcation point of the two time periods of "within marriage/after divorce" (with the divorce registration or the effective date of the judgment as the boundary). The second step is to distinguish the time period of income: separate the sublease income actually obtained during the marriage from the income from the divorce to the expiration of the lease period, and make a timeline and collection schedule. Step 3: Calculate post-marriage contributions: Track which party has been responsible for paying rent, taxes, and maintenance expenses since the divorce, as well as the time and effort invested in property management (including communication records, repair receipts, and evidence of on-site management). Step 4: Negotiation or Litigation: First, attempt to negotiate a property division plan; if no agreement is reached, during litigation, focus on proving that the income generated after the divorce constitutes revenue independently managed and operated by one party. The fifth step is to retain business evidence: keep transfer records, maintenance documents, sub-lease contracts, collection and communication records-according to Yinzhou Court's White Paper on Marriage and Family Case Trial (2019-2021), WeChat and other electronic evidence has many defects in proof and is difficult to be accepted. It is suggested to print bank running water simultaneously and keep the original carrier.

Evidence list suggests: lease contract and lease renewal agreement, deposit receipt and payment flow, rent collection record (bank flow, invoice), sub-lease contract and sub-tenant payment record, contract invoice for plant maintenance and renovation, water and electricity tax payment certificate, divorce agreement or judgment document (to determine the time boundary), written record of communication between both parties on plant operation.

4. Common misconceptions

Misunderstanding 1: All gains obtained after marriage are common property. Positive solution: the fruits and natural appreciation of personal property after marriage still belong to the individual; the new operating income after divorce is not necessarily common-the attribution of income depends on the time period, input and contribution, rather than the general "acquired after marriage".

Misunderstanding 2: As long as the security deposit is invested in the marriage, the income after the divorce can be divided. Positive solution: marital input only affects the attribution of the income generated in marriage and the calculation of the value of the lease right.

Misunderstanding 3: The right to lease cannot be divided. Positive solution: although the lease right is not ownership, but has the value of use and income, the relevant rights and interests formed within the marriage can be discounted or distributed income.

Misunderstanding 4: The party who continues to operate after the divorce only needs to collect the rent secretly. Positive solution: if the proceeds are determined to be part of the marital determination of claims or common property, concealment may be prosecuted after division.

5. Case Reference

Example: The man rented the factory before marriage, and after marriage, the husband and wife jointly paid a security deposit of 80000 yuan and contributed to the renovation. The income from the sublease for three years during the marriage was about 450000 yuan. After the divorce, the man continued to operate and got a rent of about 300000 yuan in two years. The court held that 450000 yuan in marriage is the common property of husband and wife and should be divided. After divorce, 300000 yuan is the man's independent business income, and the woman has not invested funds and participated in management, so it will not be divided. At the same time, considering the source of the security deposit (common property) and the factors forming the lease within the marriage, it is decided that the man will compensate the woman a certain amount separately.

6. The issue of aligning the assignment of leasehold rights with tax filings.

The division of the lease right of the factory involves two problems that are easy to be ignored in divorce: the first is the "disposition form" of the lease right-the lease right is not the ownership, and the court usually does not directly "award" the lease right to one party's name, but on the basis of confirming the value of the lease right in marriage, the actual operator will continue to lease it and compensate the other party at a discount; if the lease contract stipulates that the lease right is transferable and the lessor agrees to change the lessee, it may also negotiate to change the subject of the contract to one party and change the name, at which point the written consent of the lessor must be obtained and the attribution of the security deposit and prepaid rent must be clarified. Second, tax convergence-after divorce, the sublease income of the factory building belongs to the operating income, and the acquiring party shall declare and pay personal income tax according to law (the sublease income shall be declared according to the "property lease income" or the operating income, and the implementation varies slightly from place to place, and the competent tax authority may be consulted); If the rent during the joint operation period within marriage has not been declared before, the risk of supplementary declaration and late fee shall be assessed together.

Tips from the perspective of the lessor and the lessee: the lessor may receive the inquiry of "who is the lessee" when the lessee divorces, and the standard practice is to provide divorce agreement or judgment documents, change the contract subject according to the facts and re-agree the rent payment account; the lessee should notify the lessor synchronously and keep the change documents to avoid the rent payment validity dispute caused by the unclear contract subject. The internal arrangement of the family (the attribution of income agreed in the divorce agreement) and the validity of the external contract (the subject of the lease contract) are two levels, both of which must be implemented before leaving a tail.

Handling of 7. Lessee, Security Deposit and Withdrawal Disputes

Under the structure of plant sublease, divorce may also lead to tripartite disputes: firstly, the status of the secondary lessee-the secondary lease contract signed within the marriage will continue to be valid after the divorce. If the divorce agreement stipulates that the lease right belongs to one party or changes the subject of the contract, the secondary lessee shall notify the secondary lessee in writing and specify the change of the rent payment account, otherwise the secondary lessee will still perform the payment according to the original account, by the actual operator as the lessor (nominal lessee) identity collection or litigation, the part of the marriage rent arrears according to the joint claim, after the divorce rent arrears part belongs to the operator. Second, the attribution of the security deposit-the security deposit paid by common property during marriage, if the lease right is undertaken by one party at the time of divorce, the other party shall have the right to claim half of the discount compensation of the security deposit; if the security deposit is actually withheld by the lessor to offset the loss of default, it shall be shared according to the actual occurrence of the loss. Third, retirement and renewal of lease-if the party who no longer operates after divorce still occupies the factory building, the operator can claim to retire or pay the occupancy fee according to the market rent; If the lease is renewed at the end of the lease period, if the acquisition of the renewal interest occurs after the divorce and depends on the input of the operator, the income formed by the renewal belongs to the operator, and the value of the priority renewal right formed within marriage belongs to the category of common property. The core of dealing with such disputes is still the evidence of "time point + capital flow": the deposit payment flow, the signing time of the sub-lease contract, the change record of the rent collection account, the notice of withdrawal and the delivery voucher, which can be fixed item by item to clarify the tripartite relationship.

case reference: the court held that the divorce agreement was binding on both parties; if the defendant did not deliver the factory building agreed to belong to the plaintiff, he should pay the factory building ownership fee (131413.86 yuan after deducting social security and land tax) according to the contract, and the trademark, machine occupation fee and loss compensation will not be dealt with due to insufficient basis. Trial Court: Zhejiang Yuyao Municipal People's Court Case No.:(2020) Zhejiang 02

81Minchu No. 711

8. FAQ

Can the sublease income of the factory be divided after divorce?

Generally not. After the divorce, one party continues to operate and manage the sublease income belongs to the party's personal business income, the other party did not invest, did not manage, did not bear the risk, did not contribute to the income, the court usually does not support the division.

Does the margin of marital investment affect the split?

impact. If the security deposit comes from the common property of the husband and wife, the sublease income obtained during the marriage shall be divided as common property, and the marital value of the lease right may also claim a discount.

How to prove the lease right and rental income of the factory building?

Focusing on the lease agreement, security deposit receipt, rental payment records, sublease agreement, and maintenance fee payment vouchers, revenue should be broken down by time period and the original documents retained. Electronic communication records should be preserved either on the original mobile device or notarized; bank statements shall be based on printed copies.

The divorce agreement does not include the factory building. Can you claim it again?

Yes. The common property not dealt with at the time of divorce may still be filed after the divorce to file a "post-divorce property dispute" claim for division, and the statute of limitations is generally three years from the date when the right is known or should have been known to be damaged, involving the early claim of the right to lease the plant and the proceeds of marriage to avoid the loss of evidence.

9. Practical Insights from a Lawyer

The difficulty of the division of the lease income is not "how much to divide", but "the time to split first, then the contribution". The business period should be sorted out first: is it leased business before marriage, joint investment after marriage, or start after marriage? The part formed before marriage usually belongs to the original operator, and the income generated by joint operation, joint investment of funds and labor after marriage enters the scope of common division. So the first step is to align the lease contract, business license, tax records, and bank flow over time to find out exactly where the income came from.

In the specific accounting, it is necessary to distinguish whether it is simply renting to collect rent, or subletting and operating again after leasing. For simple sublease, the focus is on the acquisition time of the lease right and the difference in rent. If it is necessary to renovate and invest in equipment and manpower, the capital contribution, labor service and management contribution of both parties should be converted into it. It cannot be simply determined according to "whose name is written on the contract. Evaluation or audit can help, but the cost is not low, the amount of small cases can be calculated according to the flow and vouchers, and then decide whether to entrust.

In the way of division, the right to lease is often one of the focuses of contention. If one party continues to hold the operating rights, it may provide the other party with monetary compensation in lieu thereof; if neither party wishes to assume such rights or the necessary conditions are not met, the assets may be liquidated and the proceeds distributed.Also take into account the deposit, deposit, rent arrears, default risk, and the possible withdrawal claims of the sub-lessee, and don't just focus on the rent that has already been paid; the caliber of tax returns will also affect the determination of net income. Only by listing all these variables before the negotiation can the plan stand.

The key to the division of the rental income of the factory building is "time period + contribution": the income that reflects the joint efforts of husband and wife in marriage is common property, and the income of one party's independent operation after divorce is personal property. For the operator, after the divorce to retain rent income and expenditure, tax maintenance vouchers, with evidence to prove that "independent operation" is the key to keep the income attribution. In the divorce agreement, it is suggested that the ownership of the lease right of the factory building, the distribution of income during the lease period and the assumption of rental tax debt should be stated together to avoid disputes after the event.