Unfortunately, not all marriages or relationships work out as planned. In Australia alone, approximately one third of marriages and relationships end up in divorce or separation. When such a situation arises, one of the first questions that will come to mind for the parties involved is “How do we divide our property and assets?”
What is property settlement?
The process of splitting property and assets after a divorce or separation is called a property settlement. Through this process, all real property, vehicles, and financial assets including superannuation and liabilities of both parties are set out in the property pool. As property settlements may be a prolonged exercise, the details of the property pool will be continually updated until the process has been finalised.
Depending on the circumstances or certain agreements reached during this process there may be multiple ways in which the property can be divided. For example, where a house is bought and held in joint names during the marriage, it is possible for the parties to come to an agreement to sell the house in order to pay out any existing mortgage and then distribute the proceeds of sale as mutually agreed. Alternatively, the parties may agree for one party to retain ownership of the property on the basis that the proportionate value is reflected in any division of property.
Why is property settlement important?
The most important reason for parties to proceed with the property settlement process is to resolve and finalise the division of property and assets of the relationship. Until the division of property is finalised, the property will be at risk of a claim from the other party. The division of property will also deal with those assets that are jointly-owned such as property or joint bank accounts. The importance of a property settlement is that it draws a clear line with respect to property between the parties.
How do I settle my property throughout the property settlement process?
There are generally three ways in which parties reach a property settlement:
- Informal agreements;
- Consent Orders; or
- Court Proceedings.
Regarding informal agreements, both parties may choose to reach a mutual agreement privately as to the property settlement. However, informal agreements are generally not legally binding or enforceable in the event that one party does not comply with its terms.
Consent Orders are a legally binding agreement generally prepared by a Solicitor that has been sealed by the Court. Consent Orders are the preferred option where parties have reached an agreement on how they wish to divide their property and wish to enter into a legally binding arrangement. In circumstances where a party breaches the Consent Orders, the Court may take certain steps to enforce those orders. Once Consent Orders have been sealed, the parties cannot amend the terms of the agreement except in exceptional circumstances.
The final way in which a property settlement can be reached is via court proceedings. This involves the parties going before the courts to determine the division of property in their family law proceedings. Court matters may take a substantial amount of time before being resolved in the court system and can be a costly endeavour.
However, in situations that have a high level of conflict and/or a complicated property pool, court proceedings may be the only option to reach a property settlement. The court will consider all the facts of the relationship and property pool in determining the division of property in their absolute discretion.
As can be seen from the above, there are multiple ways to reach a property settlement between parties. The right advice and guidance can turn what seems a confusing process into something more manageable during a stressful period of time. Parties going through a relationship breakdown should also be aware that there are certain time frames when applying for Consent Orders or instituting Court Proceedings. Please speak to one of our Solicitors should you have any questions.