When a relationship breaks down, one of the biggest practical questions is how to divide property. In family law, a ‘property settlement’ is the process of distributing property between each spouse party. This doesn’t just mean the family home – it includes savings, cars, businesses, superannuation, and debts. The goal is to reach a “just and equitable” outcome based on the individual circumstances of the relationship.
When can property settlements occur?
Property settlements can occur immediately after separation, or some time following. Parties do not need to wait for a divorce to start sorting out finances. In fact, many people begin this process long before getting divorced so they can move on with certainty.
There are strict time limits to be aware of:
- For married couples – if they are granted a divorce before finalizing the property settlement, any application to the Court for a property settlement must be made within 12 months of the divorce becoming final.
- For de facto relationships – any application to the Court for a property settlement must be made within 2 years of the date of separation.
If parties miss these deadlines, property settlements can still be completed by consent. Otherwise, an Application must be made to the Court to proceed out of time – of which there is no certainty.
What factors are considered in a property settlement?
A property settlement involves looking at the full financial picture of both people in the relationship. This includes all assets (such as houses, bank accounts, investments, and superannuation) and liabilities (such as home loans, credit cards and personal loans). All property is relevant regardless of whether the item is owned in the name of one party, by the parties jointly, or in a company name or trust.
The general principles considered when making decisions about property settlements apply similarly to couples in a de facto relationship and marriage, including:
- What each person contributed to the relationship. Contributions include assets owned at the commencement of the relationship, income generated during the relationship, contributions through an inheritance or gift, contributions by way of caring for children, or running the household.
- What are each party’s future needs. Relevantly, this requires an assessment of each party’s income earning capacity, age, health and whether one party or both parties have the responsibility for caring for the children going forward
- What is the effect of any family violence during the relationship on each party’s capacity to contribute financially or non-financially to the relationship.
How can property settlements be resolved?
Most people resolve property settlements without going to Court. Settlements outside of Court are usually achieved quicker, for less cost, and are less stressful than Court proceedings. Some couples can reach an agreement themselves and consult lawyers to formalize the agreement. Other parties use lawyers to negotiate on their behalf or attend mediation where an independent person helps find an agreed pathway forward.
If parties reach an agreement, it is important that agreement is legally binding and enforceable. This can be done in two ways:
- Consent Orders – when parties reach an agreement about property matters, they can file an Application for Consent Orders with the Court to request the Court make the orders that reflect the property settlement by consent. The Court will only make the orders if the effect of the settlement is just and equitable in all the circumstances. Whilst parties are encouraged to seek independent legal advice, it is not mandatory that the parties have a solicitor acting on their behalf.
- Binding Financial Agreement – parities can enter into a Financial Agreement to formalize the settlement which does not need to approved by a Court. Both parties to a Financial Agreement are required to obtain independent legal advice regarding the Agreement before it can be finalised.
Where parties cannot reach an agreement about a property settlement, Court proceedings can be commenced. The process of Court proceedings can be around 12 months and involve multiple Court appearance. There are numerous options during the proceedings for the matter to be resolved by consent – and most matters do. If not, at a final hearing a Judge will review all the evidence and determine the division of property between the parties.
What is meant by the term just and equitable?
The Court will not make an order unless it is satisfied it is just and equitable to do so. This essentially means the outcome must be fair in all the circumstances – not necessarily equal. A common misunderstanding is that property is split 50/50 – that is not what the law requires. The Court will review all relevant factors and review the nature of the property and the effect of the proposed distribution of property on the circumstances of the parties.
How can Commins Hendriks assist?
We have a team of four lawyers in our family law department, and we are well equipped to provide advice at any stage of the property settlement. We recommend a party who has separated obtain independent legal advice at the earliest opportunity following separation to gain insight into how the relevant factors described above may apply to their circumstances, what information they should start gathering, and any particular issues to be mindful of with their property settlement. Following the first appointment, we are guided by the client as to what level of involvement or assistance we provide.
Our aim is to ensure our clients make informed decisions at each step of the way. We provide practical and realistic advice regarding potential outcomes, in an empathetic manner.
By Sienna Casanelia and Tara Freeburn