Marital Property Systems (Matrimonial Régimes)

Each marital property system (also referred to as matrimonial régime) refers to a set of regulations that governs property ownership between spouses during the marriage. A Marital Property System specifies whether spouses have an “estate” of property, what goes into the estate, by who is it managed and how it will be divided should the marriage fail. 

In Malta, spouses are free to choose between one of the following marital property systems:

1. Community of Property (aka Community of Acquests), 
2. Separation of Estates, and
3. Community of Residue under Separate Administration (CORSA) regulations.

Community of Property (Community of Acquests)

The community of property is referred to in Maltese as Il-Komunjoni tal-Akkwisti. Unless spouses elect otherwise their marriage is regulated by the community of property.  

The community of property establishes an “estate of property” (colloquially referred to as ‘the communal pot’). Most of what the spouses acquire will enter into this estate and may be enjoyed by the spouse together. The administrators of this estate are the spouses themselves and they jointly administer the goods in the estate.

Article 1320 of the Civil Code specifies that the community of property shall comprise of:

1. all that is acquired by each of the spouses through their work or profession;
2. the earnings from the property which belongs to the spouses individually (e.g. rent derived from an apartment that is paraphernal to one of the spouses). Unless, when the property was transferred there was the express wish that the fruits of the property are to remain the sole property of that spouse;
3. as a general rule, the earnings from property owned by the children;
4. any property that is acquired with money or other property which is already in the community of acquests, even if the property is in the name of only one spouse;
5. property acquired after marriage by the personal property of the spouses, saving such spouse’s right to deduct the sum disbursed for the acquisition of such property, and
6. any fortuitous winnings, or treasure troves found by either of the spouses;

An assumption that possessions belong to the community

In the absence of evidence to the contrary, the law assumes that property held by either of the spouses belongs to community of property. It is up to spouses to keep evidence to show that certain items are paraphernal (Article 1322, Civil Code).  

When the paraphernal property is immovable property it can be easily documented through public deeds and there is little risk of it being caught up by the community of acquests, problems arise when the paraphernal property is easily transferrable, such as money, furniture or other goods, and in such case, it may be easy for that property to become absorbed into the estate.

Administration of the Spouses' Estate

Spouses jointly administer the property within the estate established by the community of property. While acts of ordinary importance may be performed alone, acts that are more significant can only be performed with the consent of the other spouse. 

Article 1322 of the Civil Code lists the acts which are extraordinary and require the consent of both spouses. All acts not listed in Article 1322 can be performed by one of the spouses alone. 

Acts that require the consent of both spouses are:

1. acts whereby rights over immovable property are acquired, constituted or alienated;
2. acts constituting or effecting hypothecation of property;
3. acts whereby immovable property is partitioned;
4. acts granting rights of use and/or enjoyment over immovable property;
5. donations;
6. borrowing or lending money, other than the deposit of money in a bank account;
7. acquisition of movables (or of any right of use of a movable or immovable), when the price is not paid on or prior to delivery. This shall not apply to debt incurred for the needs of the family or hiring of movables or immovables when the price is moderate in relation to the needs and condition of the family and the duration is for a short period of time. 
8. contracts of suretyship;
9. giving a pledge;
10. entering with unlimited liability in a commercial partnership, or subscribing to or acquisition of any shares in a limited liability company which are not fully paid up;
11. transfer of a business concern as well as the transfer of any share in a commercial partnership other than a public company;
12. any act that may give rise to a special privilege to architects, contractors, masons and other workmen over the immovable constructed or reconstructed for debts due to them in respect of expenses and price of their work;
13. when rescinding from acts referred to (a) and (c) and any declaration made inter vivos whereby any real right over immovables is acknowledged or renounced
14. any act of rescission of any act referred to in paragraphs (a) and (c), and any act of declaration made inter vivos whereby any real right over immovables is acknowledged or renounced has been settled;

     

A spouse may appoint the other spouse to appear on his or her behalf, for carrying out acts of extraordinary administration. This may avoid the unnecessary inconvenience of having the other spouse present when carrying out acts of extraordinary administration. 

When Spouse Unreasonably Withholds Consent

If one of the spouses fails to give his consent to an act of extraordinary administration the other spouse may apply to the court of voluntary jurisdiction for authorization when the extraordinary act is “is necessary in the interest of the family” (Article 1323(1), Civil Code).

Unilateral Action

Acts which require the consent of both spouses but are performed by one spouse alone may be annulled by the other spouse where such acts relate to the transfer of immovable property. If the unilateral acts relate to the movable property then such acts can only be annulled if the transfer was made gratuitously (i.e. transfer something without an obligation to give something back) (Section 1326, Civil Code).

Division of Community of Property Following Marriage Breakdown

Following marriage breakdown, the community of property will be dissolved. Parties are free to agree on how the assets and liabilities of the community of property are divided. If they disagree it will be up to the court to see how the assets and liabilities in the community of property will be divided. 

Debts
The following are the debts that are chargeable on the Community of Property (Article 1327, Civil Code):

1. costs relating to the acquisition of goods and assets owned by the community of property,
2. expenses relating to the administration of the community,
3. expenses for the needs of the family including those required for raising children,
4. all obligations contracted by spouses jointly,
5. costs relating to ordinary repairs of personal property of either spouse if the fruits of such property are entering into the community of property, and
6. any civil debt created by each spouse except those debts which have been created by a civil remedy to a wilful offence (e.g. wilful homicide, theft, fraud, etc…)

Debts which are of a personal nature (e.g. debts arising from the failure of a business) will first have to be paid out by the paraphernal property of the spouse giving rise to such a debt. But otherwise, the creditor may satisfy their claim with the part of the community which is owned by the spouse giving rise to the claim, i.e. up to 50% of the community. (Article 1329, Civil Code).
When the assets in the community of acquests are insufficient to satisfy the debts which burden it (see Article 1327, above), then the paraphernal property of both spouses may be used to satisfy the debts of the community of acquests (Article 1330, Civil Code).

Separation of Estates

When spouses opt for separation of estates they won’t be establishing a communal estate that is used and administered jointly by the parties. There will be two separate estates owned privately by the spouses and each spouse will retain full control over his or her estate of property. While there will be one family, spouses will be economically independent. 

One of the main advantages of the separation of estates is that the spouses are not liable to the debts incurred by the other spouse. All that is acquired by one spouse will remain his or hers and all liabilities acquired by one of the spouses will have to be honoured by that spouse alone.

If spouses opt for separation of estates before getting married, the spouses remain the sole owners of any possession they had before marriage and after marriage. If the spouses opt for separation of estates after contracting married, they will have to divide all the assets acquired by the estate since the date of marriage till the dissolution of the community of property. 

Spouses whose marriage is governed by separation of the estate can still co-own the property. They will be at liberty to choose which property they’d like to co-own and which property remains paraphernal. 

In the same way, the spouses will be responsible for the debts that they acquire unless the acquire a debt jointly. 

Community of Residue under Separate Administration (CORSA)

Under this marital property system, spouses are the sole owners of what they acquire and administer property without the consent of the other spouse. Once the parties terminate the CORSA, what each spouse will have, after deducting debts (the residue) is shared with the other spouse. The CORSA marital property system may be attractive to spouses involved in business activities and wants to limit liability.

Property covered by CORSA

The property that is subject to the Community of Residue under Separate Administration is the same property that is covered by the Community of Property, that is to say:

1. all that is acquired by each of the spouses through their work or profession;
2. the earnings from the property which belongs to the spouses individually (e.g. rent derived from an apartment that is paraphernal to one of the spouses). Unless, when the property was transferred there was the express wish that the fruits of the property are to remain the sole property of that spouse;
3. as a general rule, the earnings from property owned by the children;
4. any property that is acquired with money or other property which is already in the community of acquests, even if the property is in the name of only one spouse;
5. property acquired after marriage by the personal property of the spouses, saving such spouse’s right to deduct the sum disbursed for the acquisition of such property;
6. any fortuitous winnings, or treasure troves found by either of the spouses;

Ownership

A spouse owns and administers all that is acquired in his or her name. Spouses are free to acquire property together and co-own certain properties. In this regard, the CORSA property system is similar to the Separation of Estate régime, hence all income derived from the spouse is administered by that spouse. At the same time, all debts and liabilities incurred by a spouse will have to be honoured by that spouse, shielding the other spouse from the debts incurred by the other spouse.

Terminating the CORSA 

Spouses whose marriage is regulated by CORSA may decide to terminate the CORSA:
a)    by mutual consent – the spouse whose involved in the risky business may be retiring. In such case, the parties may then opt for another marital property system.
b)    dissolution of marriage
c)    disorder state of affairs of one of the spouse or because one of the spouses is not substantially contributing to the marriage.

Upon the termination, the residue of each spouse is added together and each spouse is entitled to half.

Calculating and sharing the Residue

The residue of each spouse will comprise of the assets held by each spouse after deducting:

1. any amount paid out with paraphernal property of that spouse for debts of that spouse relating to assets held by that spouse and are caught up by CORSA
2. liabilities still outstanding by that spouse incurred in respect of such assets
3. paraphernal debts of the spouse which are in excess of that spouse’s paraphernal assets

Once the residue of each spouse is calculated, the spouses will join the residue and each is entitled to half.

Third Parties

While the CORSA is in force, third parties may only exercise their rights against the spouse who they contracted with. 

If the CORSA is no longer in force, third parties may first satisfy their debts from the half assigned to the spouse they contracted with. If this amount is not sufficient to satisfy the creditor’s request, the creditor may turn onto that share given by that spouse to the other spouse, if any. But the creditors cannot satisfy their debt with the residue generated by the other spouse.

Gratuitous alienations

In order to protect one spouse being defrauded by the other spouse, one spouse may not make large and or unjustified donations to third parties without the consent of the other spouse.