10 Key Facts About Property Settlement
What is Property Settlement?
When a marriage or de-facto relationship is over, the financial ties between the parties need to be finalised. For instance, if there is a jointly-owned house, it needs to be decided what happens to the house. It may be that the house is sold, or one party may be able to take it over and, if necessary, “buy” the other party’s interest.
The Family Law Act 1975 sets out the process and law regulating Property Settlement.
Often people hear stories from friends, relations or work colleagues about their experiences; because the Family Law Act deals with people on an individual basis, each matter must be looked at on a “case-by-case” basis. Every relationship and situation is different; so to know where you stand, you must obtain advice about your situation, not someone else’s experiences.
Do separating couples need to have Property Settlement?
Yes. One of the most important reasons for having a property settlement is to finalise your financial ties with your ex-partner.
If you do not finalise your financial relationship, either party may come back at the other down the track and make a claim for Property Settlement. If this happens, the Court doesn’t look at the property at the date of separation, they look at it at the date of proceedings, and, if it makes it all the way through the Court process, at the date of Trial. Therefore, there are situations where property or debt acquired after separation by one party is brought into the property pool.
Examples of this are real estate or assets acquired after separation (even with another person), increases in superannuation and savings, and increases in the former matrimonial home.
Extreme cases can be when one party inherits an amount of money or has a lottery win after separation, but prior to a formal property settlement taking place. In this situation, the inheritance or lottery win can be included in the property asset pool for the Court to consider.
There are also practical issues which need to be addressed after separation; such as, who is responsible for the mortgage payments, personal loan or credit card payments?
Before agreeing to any proposed settlement, it is most important that you get legal advice as to your particular financial entitlement (and obligations) so that when you are dealing with your former-partner, you know where you stand, legally.
How do I start the Property Settlement Process?
Whether you reach amicable agreement or not in relation to your property settlement, the best way to finalise the financial relationship is to commence the property settlement process as soon after separation as is practicable. Most matters, even when there is a dispute, do not go to a Trial before a Judge.
At Journey Family Lawyers, we normally start the process by advising you of your entitlements. With your instructions, we will then draft a letter to send to the other party to try to reach agreement without the necessity of going to Court.
Alternatively, Mediation between the parties is an option we recommend if it is likely that an agreement can be reached. However, in some cases where there is little likelihood of Mediation succeeding, commencing Court proceedings may be appropriate course of action to take because the Court process induces parties to address the issues and Mediation can follow.
Often, there are disputes about what property is in the property pool, what values are attributable to those assets and how they should be managed during the process (i.e. who should pay the mortgage, or who should live in the house before a final Property Settlement has taken place). These types of issues vary on a case -by-case basis but must also be dealt with to allow the Property Settlement process to proceed.
What is Property?
Property includes all the assets under the ownership OR control of either or both parties to the relationship.
This includes real estate, interests in businesses and companies, superannuation, shares, money in bank accounts, vehicles, boats, antiques, jewelry or artworks and so on. Also, interests or entitlements in trusts may also form part of the property pool.
Also there are some financial resources that one party may have access to that a Court can also take into account. Examples of financial resources can be interests in deceased estates and interests in family trusts.
What are the time constraints for Property Settlement?
Either party to a Marriage or a de-facto relationship (as defined by the Family Law Act), can bring an Application for Property Settlement at any time after separation.
Generally it is best to deal with Property Settlement as soon as separation occurs. At the least, separating parties ought to obtain independent legal advice as to their rights and obligations for property settlement so that they do not agree to accept less than their entitlement.
With some exceptions, separating parties must commence proceedings for a Property Settlement (bring a Court Application) within twelve months of their Divorce, for a married couple and for a de-facto couple, within two years of their separation. If you do not commence property proceedings within these time limits, you may lose your rights.
If a Property Settlement is not reached prior to these time limits, the other party may still be able to bring an Application for Property Settlement “out of time”. So, if you have not had Property Settlement, you may still be at risk outside these time limits.
How do I formalise our Property Settlement?
Often through negotiations, agreement can be reached and then the best way to finalise property is through Consent Orders. Consent Orders are Orders both parties have agreed to and which a Court or a Court Registrar then scrutinises and if they are satisfied that the proposed settlement is just and equitable, they will make the Orders
There is also an option to formalize any agreement is a document called a Binding Financial Agreement. This is an agreement between the parties that has not been scrutinized by the court system. There are many cases where these types of agreements have been overturned by the courts. Therefore we strongly recommend that separating parties do not use these types of agreements.
How is Property Settlement calculated?
The Family Law Act and the Courts have established a four-step process to work out the respective parties’ rights and entitlements in a Property Settlement.
Broadly speaking, the process considers what is in the property pool, including all assets and liabilities; it then looks at initial contributions, contributions during the relationship, both financial and non-financial and then it looks at post-separation factors. As there are many variables, each case must be looked at on an individual basis to determine the respective entitlements.
Before agreeing to anything, we strongly recommend you see a Lawyer to go through this process to work out your position.
Do I have to go to Court for Property Settlement?
Most cases do not go to Court or to Trial. This is because the process is aimed at negotiating and finalising the property settlement without the necessity of a Court action. There is a process that encourages settlement. The result is that, even when Court proceedings are commenced, very few cases end up in a final Trial.
What happens if one party does not want to have Property Settlement?
It is not uncommon that one party wants to finalise the Property Settlement and the other party does not. At Journey Family Lawyers, we firstly write to the other party or their Lawyers suggesting a process to mediate/negotiate the Property Settlement.
If the other party refuses to mediate or negotiate or, does not do so in a genuine manner, the next step is to bring an Application for Property Settlement. This means that both parties go before the Court. The Court makes directions to clarify the issues; it generally also Orders some form of Mediation. Often this process results in an agreed settlement (and Consent Orders).
This system means that, even if a party does not want to cooperate, the Court system deals with the Property Settlement, regardless.
What should I do?
In the first instance, you need to know where you stand in relation to your entitlements and obligations. If you do not do this you will not know what to expect and you may agree to something that is not “fair”.
Also, if you do not know what your entitlement is, you cannot negotiate effectively with the other party.
Therefore we recommend your first step is to see a Lawyer to ascertain your individual situation.
At Journey Family Lawyers, at our initial consultation, we try to work out a client’s entitlement and a suggested course of action to settle the matter as soon as practicable.
Sometimes after ascertaining your entitlement, you may choose to discuss it with your former partner. If you come to an agreement, we recommend you use a Lawyer to formalise that agreement.
Other times, it might be a matter of engaging Lawyers to deal with the issues.
Each case is usually slightly different and it depends on the individual situation.
If you are in doubt with any of these matters, always consult a Lawyer.