Arizona is a community property state, which means that all assets are either labelled as
community or sole property. Generally, “community property” is defined as any property
acquired by the parties during their marriage. Sole property includes anything acquired before
the marriage, gifts, and inheritances. While this may seem simple, classifying property is not
always clear cut. For example, a house owned by one party prior to the date of marriage is
considered that person’s sole and separate property. If it is categorized as “clear cut” sole
property, that party would be awarded the house in the divorce, and the other party would receive
nothing. However, if community money was used to help pay for, or improve, the house during
the marriage, there may be an equitable lien on the property. This means that the spouse who
does not own the house as their sole and separate property would still be entitled to some money
out of the equity in the house.
The court recognized in Drahos v. Rens, 149 Ariz. 248 (App. 1985) that the community
should be reimbursed for their contribution to a spouse’s separate property. The court created a
formula, now referred to as “the Drahos formula,” to help determine how much the lien is worth.
This formula was then modified in Barnett v. Jedynak, 219 Ariz. 550 (App. 2009) and remains as
C + (C/B x A)
“A” is the appreciation in the separate property’s value during the marriage.
“B” is the appraised value of the separate property as of the date of marriage.
“C” is the community’s contributions to the principal.
For over a decade, lawyers and judges have used this formula to determine how much the
equitable lien owed to the non-owning spouse is worth. In September of 2022, however, the
Court decided in Saba v. Khoury, 516 P.3d 891 (2022), that this formula should only be used as a
starting point for judges making these determinations. Each case is unique, and judges should
have the flexibility to consider additional factors when making their decisions. The court in Saba
reaffirmed that trial courts may select whatever method will achieve “substantial justice” for the
parties. Saba makes clear that the Drahos formula should act as the baseline from which judges
can depart if appropriate based on the facts of the case.
As you can see, dividing assets can quickly become convoluted. To give you the best
chance of receiving what you are entitled to, it is a good idea to talk to an experienced family law
attorney. We have the experience you need. Call us for a free case evaluation. We’ll be happy to
talk with you.