Why I will never tell you an “informal property agreement is the way to go…”

We understand that you may not want to rock the boat. You have finally reached an agreement. You’re happy, your ex partner is happy, you just want to keep it amicable and move on. Here is why you should consider rocking the boat.

Informal Property Settlements NOT Binding

The Family Court Rules provides that any “agreement” between the parties as to the distribution of the property between the parties after settlement should be by way of:

  • Appropriate Consent Orders, or a Binding Financial Agreement (which must comply with the requirements of the Family Law Act).
  • Any other agreement will not be upheld as being a binding agreement between the parties as to the distribution of assets.
  • Time and time again, the Courts are asked to consider whether agreements reached for property settlements that have not been formalised by the parties, are grounds to dismiss applications for property adjustments. Unfortunately, the Court has previously found that despite the information agreements, it can be unjust not to proceed with a property application.
  • Adding considerable expense in both legal fees and further, property adjustments to the other party.

In Fan v Han in 2016, the Court was asked to consider the validity of an oral agreement. The husband alleged an oral agreement, that he would pay the wife the sum of $130,000.00 and the wife would transfer her share of the home to him. The husband gave the wife the majority of the $130,00.00 and maintained the mortgage over the home. The wife refused to sign the transfer forcing the husband to seek a legal remedy.

Circumstances Change

So while your ex partner is happy now, there is no guarantee that 12 months or even 2 years from now, that will still be the case. There are many circumstances where an ex may change their mind. Hearing from friends and family that they could have gotten more, becoming unhappy if you re-partner, your income increases, their income decreases, and the list goes on.

If your ex partner is not willing to document the settlement in a binding manner, perhaps it is time to ask why not? Maybe they want to keep their options open.

Real Property Transfers

Also if there is real property to transfer, you are unable to avoid paying stamp duty on the transfer without a binding financial agreement or consent orders.

Interim Property Settlements

Maybe you are already aware of the risks of final informal property settlements, but you are planning on selling the house and dividing the money and then sorting it all out later. There are risks to informal interim property settlements as well.

In the event that you distribute funds (for example, the proceeds of sale of a home), it may be difficult to get your ex partner to engage in further negotiations (for example, to divide superannuation or the payment of other debts). You may end up having to start Court proceedings to get a fair outcome.

Your ex partner may spend some or all of what they receive, if you then have to make an application to the Court for property, these funds will not necessarily be taken into account in the final property settlement.

You may have inadvertently given your ex-partner more property than they would otherwise be entitled to. Resulting in a division of assets between you in a way which does not reflect a fair outcome and it may be harder to achieve a better outcome if you have an informal “agreement“.

When you separate both of you will usually need some funds until you are able to reach a property settlement. Decisions to release and share significant funds on an interim basis should be made carefully, and legal advice is recommended. If a house is to be sold prior to a formal property settlement then it is usually recommended that the proceeds be held in a secure way until the final property settlement is formalised.


Specialist Family Lawyers for Sydney and Newcastle

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The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.

Solicitor Director
Family Dispute Resolution Practitioner