Commercial Real Estate Divorce Buyouts Hit by Refinancing Squeeze

A divorce question that is also a credit-market question

In August, Cleveland family-law columnist Andrew Zashin wrote about what business owners should do to protect commercial real estate when a marriage ends. His advice is aimed at Ohio owners, and on its face it is a family-law story. Read alongside 2026 lending data, it is also about a commercial property market where cheap refinancing, the usual way to pay a spouse for their share of a building, is much harder to get than it was a few years ago.

The main point of the column is that a divorce does not automatically force the sale of a commercial building. Zashin says a sale made only to split the value can disrupt the business that uses the building, force it to relocate, and create tax and transaction costs. He notes that Ohio law lets courts weigh liquidity, tax consequences, sale costs and the economic sense of keeping an asset whole when they divide marital property.21 He suggests paying the departing spouse with cash, investments or other property, and says refinancing may supply the money for a buyout.21

That last option is where the advice meets the wider market. When refinancing is cheap, a buyout is mostly paperwork. In 2026 it is not cheap.

Title is not the whole story

Before the financing problem, it helps to see how courts decide what part of a building is divisible at all. Zashin writes that under Ohio law, whose name is on the deed does not settle whether property is marital or separate. Holding the building in an LLC or another entity also does not automatically protect its value.21 He separates appreciation caused by a neighborhood becoming more desirable from appreciation caused by renovations, management work or marital money used to pay down debt. Sorting the two may require tracing financial records and hiring an appraiser.21

Practitioners in other states describe the same approach. An Alabama firm that represents developers calls it the active appreciation doctrine. It says owners defend pre-marital properties by tracing capital improvements to their source and showing that growth came from market forces rather than marital money or effort.25 A New York firm notes that commercial holdings are generally subject to equitable distribution unless they were acquired separately before the marriage and kept apart. It adds that courts look at cash flow, expenses and each spouse's contributions as well as market value.24

The professional advice is consistent: separate property keeps its protection only if the owner can document it. Zashin tells owners to keep records of when the property was bought, how it was paid for, what debt existed at the time of the marriage, and how improvements were funded.21 A Florida-area family law firm says a standard comparative market analysis is not enough for high-value property and recommends certified appraisers, forensic accountants and business valuation specialists.22

The maturity wall changes the buyout math

The numbers show how hard it is to pay for a buyout this year. According to the Mortgage Bankers Association, $875 billion of the roughly $5.0 trillion in outstanding commercial mortgages, or 17%, is scheduled to mature in 2026. That is down 9% from the $957 billion scheduled for 2025.16 Another $652 billion is due in 2027.20 Office properties have 17% of their loan balances maturing this year, industrial 23% and hotels 30%.16

The interest-rate gap matters most for a spouse trying to refinance. One brokerage cites S&P Global analysis putting the average rate on newly originated commercial real estate loans at about 6.2%, compared with 4.3% on the debt being replaced.17 A Midwest brokerage gives an example: a loan first written at 75% of a property's value may now qualify for only 55% to 60% of current value, because the property is worth less and the debt costs more to carry.11

This is the core problem for a divorcing owner. Under Zashin's approach, the owner keeping the building takes on new debt and uses the proceeds to pay the spouse. If the lender will only advance 55% of a lower appraised value, the cash available for the buyout may be smaller than the spouse's share of the equity. Neither the column nor the market reports say this directly. But Zashin's emphasis on using other marital assets to make up the difference is far more important in 2026 than it would have been in 2021.2111

Personal guarantees survive the decree

Commercial debt adds another problem that residential mortgages rarely have. The Alabama firm notes that commercial real estate loans usually require personal guarantees, and lenders often ask the developer's spouse to sign as well. A divorce decree does not cancel a contract with a bank.25 If the spouse who keeps a heavily leveraged building later defaults, the lender can still pursue the ex-spouse who signed the guarantee. The firm recommends deadlines to refinance (for example, 90 days), indemnification clauses, and negotiating with the lender to swap in other collateral so the departing spouse can be released from the guarantee.25

A 90-day refinancing deadline sounds reasonable until you look at office loans. Trepp data cited by CRE Daily put CMBS office delinquency at a record 12.34% in January 2026, before it eased to 11.4% the next month. The main cause was not missed monthly payments. It was owners who could not refinance at maturity even though their buildings were still producing cash.18 The same report says lenders are less willing to grant extensions without significant concessions from borrowers, which effectively ends the post-pandemic pattern of extending loans and waiting.18 For an office owner in the middle of a divorce, a deadline to refinance may become a deadline to sell.

Where the reporting diverges

Observers disagree about how severe the cycle is, and that disagreement affects how divorcing owners should set up their deals.

The MBA reads the 9% decline in maturities as a sign that the market is getting past the peak. Its chief economist expects the maturing debt to bring more lending, helped by steadier property values.20 Urban Land quotes a Walker & Dunlop executive who says concern is lower than it was in 2024.13

Other data is less reassuring. MSCI counted $130.3 billion in distressed U.S. commercial real estate at the end of 2025, a $14.1 billion increase over the year, and office made up $62.9 billion of it.13 CRE Daily, citing Commercial Observer, reports that analysts expect more than half of the more than $100 billion in CMBS loans maturing in 2026 to miss refinancing or full repayment.18 One brokerage cites an S&P Global Market Intelligence estimate that maturities will peak in 2027 at about $1.26 trillion.11 That figure sits awkwardly next to the MBA's $652 billion for the same year, which suggests the two groups measure different things or count extensions differently.

On balance, the evidence points to a cautious view. Overall lending conditions are improving, but office debt, especially short-term loans originated in 2021, remains under real pressure.18 A divorce settlement that assumes a smooth office refinancing is betting against a large share of current data.

REIT shares are easier, but not risk-free

Not every spouse owns buildings directly. Many hold commercial real estate through REITs, and the type of REIT changes the divorce analysis. A Texas firm notes that publicly traded REITs can be valued daily and divided easily. Non-traded REITs may be carried at their original offering price until a net asset value is set, so the value on paper can differ substantially from what the shares would actually sell for.2 The firm adds that REITs heavy in office, retail or industrial property can change in value between separation and trial. That makes the choice of valuation date a strategic decision.2

Office REIT prices show how large those changes can be. Nareit's tracker showed one-year total returns, as of early October, of about -16% for BXP, about -45% for Empire State Realty Trust and about -79% for Franklin Street Properties. COPT Defense Properties was up roughly 22%.9 The sector's market value rose from $38.9 billion in early April to $51.1 billion by mid-July, according to Simply Wall St data.3 On a podcast, Nareit's Edward Pierzak described office as divided between stronger and weaker assets rather than dead. He noted that active institutional managers are deliberately holding more office than index weights call for.8

For divorcing couples, the practical point is that office exposure held through REITs can swing in value by a large percentage within a few months, depending on the timing of the valuation. Agreeing on a fixed valuation date, or dividing the shares in kind rather than trading them for other assets, can reduce that risk.

What the planning advice really means now

The planning advice is not new. Zashin points to prenuptial agreements, postnuptial agreements where Ohio law allows them, and operating or partnership agreements with transfer restrictions and buyout terms.21 Other practitioners agree that LLCs and trusts work best when set up before any marital trouble, and that moving assets just before a divorce can backfire in court.23

The 2026 lending market raises the stakes of that advice. When refinancing was cheap, a poorly planned divorce cost legal fees. Now it can force the sale of an office building into a market where, as one brokerage puts it, troubled assets trade at prices that reflect financing pressure rather than long-term value.11 Zashin's closing point, that careful documentation, realistic valuation and advance planning keep a long-term investment from becoming a burden, is a family-law argument. Under current lending conditions, it is also an argument about credit risk.21