Mcphee Lawyers


25 May 2015

Relationship + Separation + Property + Handshake Agreement = Not Legally Binding? – Part 1


Part 1 of our 2 part series on legally binding de facto and matrimonial property matters:- Considering Consent Orders    

You need a Court Order or Binding Financial Agreement to have a legally effective property settlement.

It is important to formalise the agreement reached with respect to the distribution of property (matrimonial or de facto).

A document either handwritten or typed and signed by the parties is not a legally binding document Some parties go to the extent of having their signatures witnessed with these documents.  This does not make the document a legally binding document.

How to legally formalise an agreement between parties – Consent Orders

In order to legally formalise an agreement, you do not have to go to Court.  If you agree on the distribution of property you can obtain a Consent Order approved by the Family Court of Australia.  You need to lodge an Application for Consent Order and Minutes of Consent Order.

There is a filing fee which is currently $155.

If the Court is satisfied that the terms of the Order are just and equitable then the Order will issue. It is important to have a lawyer draft the Consent Order to ensure that it gives effect to the agreement.

Benefits of a Consent Order & Non-Compliance

There are many benefits for a party documenting their property settlement by way of a Consent Order.  It is a cost effective instrument in protecting and enforcing your property settlement rights as well as avoiding significant loss of time and legal costs in the future.

The Consent Order will clearly document the party’s agreement and is binding on both parties and brings to a conclusion their property division.

The Consent Order also results in stamp duty being waived if a party is acquiring the other party’s interest in the family home and capital gains tax being rolled over.

If a party does not comply with a Consent Order there are consequences.

Risks of not formalising the agreement

Some of the risks of not formalising the agreement include: –

  • Uncertainty as to whether liabilities are going to be serviced;
  • Your  credit rating can be affected;
  • A party may say that they will indemnify the other party from liability however this does not prevent creditors suing both parties;
  • There could be complications if a party re-partners;
  • A party’s financial circumstances change;
  • A party sells an asset without the consent, knowledge or involvement of the other spouse contrary to the settlement terms between the parties and the sale proceeds have been used or diminished;
  • A party may change their mind to the agreement therefore there is no closure as to the property division. A party seeks legal advice in the future be it months later or even years later claiming that the distribution of property was not fair, left out assets or liabilities or they would like to formalise the terms of settlement which is different to what was informally agreed.

There is also a statutory limitation period (which must be considered) in which the distribution of property must be finalised by.  For matrimonial matters the limitation period does not commence until the parties are divorced and the Divorce Order takes effect.  Parties must resolve their distribution of property and maintenance matters within 12 months of the Divorce Order taking effect.  The limitation period for de-facto property settlements and maintenance is 2 years from the date of separation.  After the limitation period has expired a party who wishes to apply for an Order in relation to property or spouse maintenance must obtain the leave of the Court which will only be given in unusual circumstances.

Are you considering a Consent Order?

If you would like to discuss with us Consent Orders or about your options in resolving your family law dispute, please make an appointment with one of our solicitors.

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