Risks in postponing Property Settlements and Property Orders

It is common for clients who have recently separated from their partner to be reluctant to finalise their property arrangements or tempted to leave things “as they are”.

Unfortunately, there are a number of risks and potential pitfalls with this approach, as we’ll explain in this article.  

The Family Law Act 1975 (Cth)

In the context of family separations in Australia, the Family Law Act 1975 (Cth) (‘FLA’) has exclusive jurisdiction in proceedings between the parties to a marriage or most de facto relationships with respect to the property of both or either person. If you have been married or living in a de facto relationship and have recently separated from your partner, then the FLA will most likely set the rules for you. 

If you are unsure whether you are currently or have been in a de facto relationship, you might find this article helpful.

Courts exercising the FLA’s jurisdiction (‘Court’) have an impressive array of powers to both protect and adjust the property interests of separated couples as it considers appropriate (‘Property Orders’).  You will need to seek legal advice about what ‘appropriate’ may mean in your case.  

Generally, the majority of property issues between separated couples that are formally resolved are done so by a mutually agreed settlement (‘Property Settlement’). This is usually in the form of Consent Orders.  Where a settlement is unable to be agreed on, either party can apply to the Court to protect or reallocate the property of that person and their ex-spouse or de facto (‘Application’).

In light of this, formal Property Settlements are generally negotiated by taking into consideration what the parties would stand to receive if the matter were resolved by Application and determined by a judge in a contested hearing in Court, with concessions often made to avoid the costs, stress and delay of litigation.   

The time limits for Applications

A person who has been divorced will have one year from the date that their divorce takes effect to bring an application while people from a de facto relationship have two years from the date of separation.

After the relevant time period (‘Time Limit’), Applications can only be brought with permission of the Court (‘Extension of Time’). Such permission must be specifically applied for.   Permission to bring an Application out of time will not be granted by the Court unless failure to do so would cause hardship to one of the parties (‘Hardship’).   The reasons for the delay are also likely to be considered. 

Married couples who are separated but have not yet divorced won't have triggered any statutory limitation period.  However, the information set out below will still be relevant to them. 

It is important to note that there may be other conditions, not covered by this article, which could apply to spousal maintenance applications.  The list below is not exhaustive and there may also be other factors to take into account in your situation.

The impact of Time Limits on Applications and other general risks with postponement

  1. It is more expensive to bring an Application after the Time Limit, rather than before, because of the need to ask for the Court’s permission and satisfy the Court that Hardship will be suffered if an extension is not granted. Further, there are no guarantees that the Court will grant an Extension of Time.   

  2.  It may be harder for a party to negotiate a Property Settlement after their Time Limit has passed, as the ex-spouse or de facto may know that an Extension of Time is needed (together with all the additional legal costs associated with this).  Without the immediate prospect of litigation looming over a stubborn party, it may be harder to bring them to the negotiating table. 

  3.  An overriding principle that the Courts must apply in determining Property Orders, or in considering whether to make any Property Orders at all, is that the Court can only do so if it is just and equitable. The longer that negotiations are left following separation, the greater the risk of a Court deciding that it will not disturb the status of each parties current property interests. Property Orders are, to a large degree, subject to the Court’s discretion. 

  4. After separation, parties are not expected to keep their financial affairs ‘on hold’.   Money is earned and spent, more property acquired and lost, there may be gifts received and windfalls gained, changes to employment and employment opportunities, etc.  In other words, life carries on.  These are all factors that the Court must take into account when exercising its discretion in making Property Orders.  

    It is also worth remembering that the more time that passes following separation, the more the state of each person’s financial affairs will have changed.   This may increase the number of issues for negotiation (or if negotiations fail, to contest in Court).   Credit for post separation financial contributions and how to treat property a party has acquired after separation are often contentious issues in Property Settlements and Applications and a lot of time and money can be spent on resolving these concerns. 

Each point above could be seen as a risk for some parties, an advantage for others, and at the very least, a knife that can cut both ways.  

We understand that formally finalising your property and financial affairs with an ex-spouse or de facto is often an emotionally difficult time but you should take comfort in the knowledge that it will allow you some closure and the chance to move on.

 

Practice Area: Family Law

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