When you divorce or your de facto relationship breaks down, you will need to divide your property. That process is known as making a property settlement. This article explains whether and how to formalise your agreement.
The law does not require you to create a written document that divides your property. After a short marriage, you might each agree to take the property you brought into the marriage and divide the property you acquired together in a way that seems fair to you both. Once you are each in physical possession of the property you will each keep, there may be no need to do anything else.
Informal property settlements are not binding on a Family Law Court. If one party wants to back out of an informal agreement and applies to the court for a financial order, the court might not adopt the informal agreement as its own property settlement. If you want to avoid that risk, you should make your agreement binding.
It is particularly important to make a property settlement binding if it requires a part to do something in the future. For example, if you agree that one former spouse can continue living in a home until a particular date when the house will be put on the market for sale, you will probably want to make that agreement enforceable in court.
There are two ways to make an agreement binding. You can prepare and sign a binding financial agreement or you can apply to the court for a consent order. We explain those options below.
You can place the terms of your property settlement in a written document known as a binding financial agreement. To make it binding on the court, you must comply with certain legal requirements. One requirement is that each party must obtain independent legal advice before signing the agreement. Other articles on this website explain binding financial agreements in more detail.
An alternative to a binding financial agreement is a consent order. Once you make an agreement for a property settlement, you can apply to a Family Law Court to enter an order that adopts the terms you have agreed upon. Other articles on this website explain how to apply for a consent order.
One advantage of a consent order is that you do not need to obtain legal advice before you formalise your agreement. Another advantage is that consent orders are somewhat easier to enforce because they already exist as a court order.
On the other hand, a Family Law Court will only enter a consent order if it considers its terms to be fair and reasonable. That is not usually a problem, but if you fear that a court might view your agreement as being unfairly favourable to one party, you might want to make a binding financial agreement instead of seeking a consent order. Courts must usually enforce a binding financial agreement even if the court thinks the agreement is unfair.