5 Top Reasons Why You Need A Consent Order Or Binding Financial Agreement

5 Top Reasons Why You Need A Consent Order Or Binding Financial Agreement

But failing to document your agreement comes with some BIG risks. In this article, we’ll give you our 5 top reasons why you need to have a legal agreement either by way of a Consent Order or Binding Financial Agreement (BFA).

1. Change of Mind

It’s not uncommon for one party to change their mind about the agreements reached at the time of separation. We recently had a client who was involved in a de-facto relationship of 15 years. At the time of separation, they made an informal agreement, and our client paid her ex-partner a lump sum to “buy him out” of the house, being the main asset of the relationship. At the time, they believed this figure as fair. They didn’t want to obtain a Consent Order from the family court, neither did they put a BFA in place.

Six years later, our client received a letter from her ex-partner’s solicitors. He had found out that she had received an inheritance of about $250,000, had acquired an investment property and that the value of the house that they had lived in had increased by about $120,000. Her ex-partner wanted a share of the inheritance, the investment property, and the increase in value of their home. But could he?

Well, under family law, and in exceptional circumstances, the court will grant permission for a property claim to be brought outside the two-year time limit from the date of separation in a de-facto relationship and 12 months from the date of divorce if married.

In this case, the court gave permission for her ex-partner to bring a property claim. This meant that her post-separation assets were now included in the pool of assets available for division as was the increased value of the home. Eventually, her case settled. But this was not without substantially increasing her legal costs and taking on additional debt/finance to provide settlement funds to her ex-partner. All of this could have been avoided if they had taken legal advice at the start and formalising their agreement. To put this in perspective, her legal costs could have been around $5,000, instead, they were in the tens of thousands!

2. Stamp Duty Exemption

Using the example above, had our client and her former partner, sought legal advice at the time of separation and entered a consent order or a BFA she would not have paid stamp duty on the transfer of the property to her. There is no stamp duty payable when there is a transfer of property to the other, on relationship break down if it is legally documented by way of a consent order or BFA. What she paid on stamp duty would have easily covered her legal costs of getting a consent order – protecting her future. Instead, she paid thousands of dollars to the government.

3. Superannuation Split

As part of a property settlement, you may agree to split a superannuation fund. If you do, the trustee of that superannuation fund will require a consent order or a BFA specifying that they are to make a split.  The wording required to make a split is technical and must satisfy both the trustee of the fund and the court for the order to be made.

4. Enforceability

A consent order is enforceable. If your ex-partner is in breach of a term, you can ask the Court to enforce its terms. For example, if you have agreed to sell the house and your ex-partner subsequently refuses. As long as the BFA has been properly drafted (and it is very technical), then you should be able to enforce its terms too.  Either way – it protects you from future claims from your ex-partner.

5. Protection from Your Ex-Partners Liabilities

When you legally record your agreement, you can include an indemnity clause in relation to any liabilities that have been incurred during the relationship.  An indemnity clause essentially confirms that your ex-partner will reimburse you for any liabilities either incurred by you, your ex-partner jointly or with any third party.

So, there you have it.  If you and your ex-partner have agreed on a settlement, or need assistance in reaching and documenting your agreement, our family lawyers and mediators can help.  Arora Legal offers a range of fixed-fee legal and mediation services.  To find out more, BOOK now for your free 15-minute consultation or call 07 3180 0129.