When going through a divorce, one of the most hotly debated topics is the division of property and assets. In California, property and assets acquired during the marriage are presumptively Community Property and are subject to equal division. But what happens when one spouse continues to live in — or otherwise exclusively use — community property after the date of separation? That is where a Watts Charge comes in.
The Origin: In re Marriage of Watts
In re Marriage of Watts, 171 Cal.App.3d 366 (1985)
The Watts Charge takes its name from the 1985 California Court of Appeal decision In re Marriage of Watts (171 Cal.App.3d 366). In that case, the court held that a spouse who exclusively uses community property after the date of separation may be required to reimburse the community estate for the reasonable value of that use. The rationale is straightforward: because both spouses share an equal interest in community property, one spouse's exclusive enjoyment of that asset comes at the expense of the other. Fairness requires an accounting.
How Does a Watts Charge Apply?
The most common scenario involves the family home. After separation, one spouse typically remains in the residence while the other moves out. The spouse living in the home is receiving a benefit — free or below-market housing — that is funded in part by the other spouse's community property interest. A Watts Charge allows the court to credit the departing spouse's share of the community estate with an amount equal to one-half of the fair rental value of the property for the period of exclusive use.
A Watts Charge is not automatic. The out-of-spouse must raise it — typically by requesting it in their pleadings or at trial. Courts have discretion in how they apply it, and the charge can be offset or waived under certain circumstances.
How Is the Charge Calculated?
The calculation is based on the fair rental value of the property during the period of exclusive use — from the date of separation through the date the property is sold, transferred, or the exclusive use ends. The out-of-spouse is entitled to credit for one-half of that rental value against the community estate. For example, if the fair rental value of the family home is $4,000 per month and one spouse lives there exclusively for 18 months after separation, the total rental value is $72,000. The departing spouse would be entitled to a Watts Charge credit of $36,000 — one-half of the total — against the community estate at the time of division.
Example Calculation
Fair rental value: $4,000/month × 18 months = $72,000 total. Watts Charge credit to departing spouse: $36,000 (one-half).
What Can Offset a Watts Charge?
Mortgage Payments
If the spouse in possession has been making mortgage payments on the community property out of their own separate funds after separation, the court may credit those payments against the Watts Charge. Paying down a community debt with separate property funds can reduce or eliminate the charge.
Epstein Credits
Related to Watts Charges are Epstein Credits (from In re Marriage of Epstein, 1979), which allow a spouse to seek reimbursement for post-separation payments made from separate property funds on community debts — such as the mortgage, property taxes, or insurance. These credits and Watts Charges are often litigated together.
Agreement of the Parties
The parties may agree — expressly or by conduct — to waive a Watts Charge. If the out-of-spouse knew about the exclusive use and did not object or request a charge for an extended period, a court may find an implied waiver.
Child Custody Considerations
Courts sometimes decline to impose a full Watts Charge when the spouse remaining in the home is the primary custodial parent and the exclusive use of the home benefits the minor children. The equities of the situation — particularly the children's stability — can influence how the court exercises its discretion.
Practical Takeaways
If you have moved out of the family home, document the date of separation clearly and track the fair rental value of the property from that date forward.
If you are the spouse remaining in the home, keep records of every mortgage payment, tax payment, insurance premium, and repair expense you pay from your own funds after separation — these may support an offset.
A Watts Charge must be requested — it is not awarded automatically. Failing to raise it before trial can result in waiver.
Watts Charges apply to any community property used exclusively by one spouse, not just the family home. Vehicles, rental properties, and business assets can all be subject to the same analysis.
Get the Accounting Right
The division of community property is one of the most financially significant aspects of any divorce. A Watts Charge — properly raised and calculated — can mean tens of thousands of dollars in your favor. Attorney Barbara McNamara has nearly 30 years of experience navigating the financial complexities of divorce in Orange County. She will make sure every asset, credit, and charge is properly accounted for in your case.