How are family law property settlements formalised?
We LOVE it when separating couples reach an agreement by themselves, or with the help of a mediator. But the key to ensuring the agreement sticks, and parties can move on without future risk of a claim aginst them, is to have it legally formalised. Until it is formalised by one of the two ways provided for in the Family Law Act, a party can withdraw consent to the agreement (yes, even if you have put the terms into effect!) and make a claim for a different outcome in court.
If you are transferring property from one spouse to another, a legally enforcable agreement will exempt the transfer from stamp duty. If it is an investment property it will provide roll-over relief, deferring the capital gains tax until it is sold to a third party.
If you have agreed to a superannuation split (superannuation is considered part of the asset pool and can also be divided!), you need to have very technical orders, drafted in a way prescribed by the relevant legislation. If not, the trustee of the superannuation fund will not be able to act. The trustee also needs to be provided procedural fairness before the document is executed or filed with the court.
Consent Orders
One option is by entering into Consent Orders filed with the Federal Circuit and Family Court of Australia. These then become Orders requiring each party to do certain things by a nominated time to ensure that the property is divided according to the agreement. To formalise your agreement this way, you need to prepare an Application for Consent Orders which contains:
Background information of each party;
Details about the relationship and any children;
Details of all assets, liabilities and financial resources of the parties; and
A snapshot of what each party’s financial position will be after the orders have been adhered to.
You also need to prepare the Orders that you want the court to make, which is called the proposed Minute of Consent Orders.
Once the documents are signed by both parties, they are lodged with the court along with the $170 filing fee. After about 3 to 6 weeks a Court Registrar will review the Application and Minute of Order and make an assessment as to whether the division is ‘just and equitable’ in accordance with the Family Law Act. If it’s not deemed as fair, or the documents have not been done properly, the Registrar will ask you to amend the documents (but not tell you how, as that is legal advice), or request more information. If everything is in order, the Orders will be sealed by the court.
These orders are then legally enforceable and there may be consequences for a breach.
Unless there is a reason that the court will not make the orders, we generally recommend that property settlements are formalised via this method.
Binding Financial Agreements
Separating couples can also formalise their agreement via a binding financial agreement (BFAs). These are special kind of contracts which will become binding if all of the requirements set out in the Family Law Act are met.
One of the requirements is for each party to get independent legal advice on the agreement. This means that both parties need to consult with a lawyer, and the lawyer needs to certify that they have provided their client with advice about the effect of the agreement and it’s advantages and disadvantages. This requirement was included in the Family Law Act to protect people because with BFAs there is no judicial oversight and you are effectively contracting out of your rights and obligations under the Family Law Act.
BFAs allows for greater flexibility in what you can agree to, and allow couples to reach an agreement that doesn’t fit into what the court might consider fair. Another advantage is that they come into effect as soon as it is executed, which means you don’t have to wait weeks for the court to review it. BFAs are generally more expensive to enforce however because, just like any other contract, you have to go to court to obtain an enforcement order. There is also a risk that the BFA will be set aside by a court if the technical requirements haven’t been met.
A BFA can only deal with financial or property matters, whereas Consent Orders can deal with parenting matters as well.
Which Document and Why Use a Lawyer?
A lawyer will help you understand which document best suits your requirements, and educate you on what the benefits and limitations are. They also have ways to ensure the documents are drafted in a way that reduces known pitfalls. We always include an order that allows the Registrar to sign documents on behalf of a breaching party. We also clearly set out what happens in case of default, so the pathway is clear and you’re not stuck with another expensive conflict getting the orders adhered to.
There are lots of ways to minimise legal costs when you’re going through a separation or divorce which we wholly endorse. But there’s no sense skimping on the formalisation of a property agreement, in fact you should capitalise on it and get it signed, sealed and delivered as soon as possible. When it comes to drafting legal documents, money spent is money saved.