We’re fierce advocates for striving to obtain a property settlement by consent and avoiding the need to go to Court. We believe the best way to make the property settlement legally binding is through a Consent Order – it’s an Order of the Court, but no-one goes to Court.
When it comes to the substance and clauses of the Consent Order, the old adage, ‘the Devil’s in the detail,’ is particularly apt.
But what does this mean? What details should you consider, look out for, and ensure are covered in the Consent Orders?
We intend to explore this with you in a multi-part series of discussions. Today, let’s examine some of the key considerations when drafting Consent Orders to divide the property pool between the parties.
A recap of what may be included in the Property Pool
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- The property pool refers to the assets, superannuation, and liabilities of the parties to be divided as part of the property settlement.
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- Assets include, but are not limited to, the house, cars, furniture and home contents, bank accounts, shares, businesses, antiques, artwork and similar items.
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- Liabilities include the mortgage, credit cards, personal loans, outstanding tax, HECS debts, and similar obligations.
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- The goal is to arrive at an agreed net property pool value, which includes identifying the items in the pool and assigning values to those items.
- The process can be simple and straightforward, or it can be challenging, complex, and time-consuming. Factors influencing this include the attitude and conduct of the parties, the volume and complexity of the items in the property pool, and the time elapsed since separation, to name a few.
What’s involved in setting out the division in the Consent Orders?
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- The Consent Orders must detail the mechanics of dividing the property pool. This typically involves clauses that address the procedures for the division and clearly outline the parties’ obligations.
- Each specific task required to effect the division should be outlined in individual clauses, specifying who is responsible for what and setting clear timelines.
- A starting point is to work out who is getting what and who is to be liable for what, according to the agreement, who needs to do what for that to occur, and, in the event of a failure, what is to happen (contingency plans). There are many components in the property pool, but we will focus on some things to consider in general terms , particularly where there is a house involved.
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- The most common component we find in a property settlement is the house. Usually it is in joint names, with a mortgage in joint names too. Usually, it is to be transferred to one party, and that party will refinance the mortgage into their name, and pay the other party some money. There will be clauses that tell the parties their obligations and what they need to do, how, and when, for that house transfer, refinance and payment to occur.
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- The details in the clauses need to be specific and cannot be vague. Precision is key.
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- Consideration needs to be given to a contingency plan. For example, the party who is to receive the house may have finance fall through, or not be able to pay the other party. The Consent Orders should set out what is to happen in that event – these are usually clauses that say the house is to be sold, with proceeds divided according to a mathematical formula that takes into account the overall percentage entitlement outcome that has been agreed upon for the property settlement.
- Likewise, consideration needs to be given to the ‘day to day’ mechanics, such as who will be responsible for mortgage repayments, utility and house expenses pending the transfer (or sale), and indeed, who will have the right to occupy the house in the meantime. Again, all these aspects should be covered, in detail.
Some other things to consider
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- Before committing to an agreement where a house is to be transferred and the mortgage refinanced, it is imperative that the party who is to do this makes enquiries with their lender/broker to ascertain borrowing capacity and whether this is financially possible. This should also take into account how much that party may need to pay the other party. Borrowing pre-approval should be obtained.
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- A transfer of a house under a Consent Order can serve to waive stamp duty.
- If applicable, CGT advice should be obtained from an Accountant in the event that the house is likely to be sold.
The above discussion covers only some of the requirements and things you need to consider and implement.
Join us next time when we discuss what needs to be done in consent orders when covering the division of other common assets, superannuation and liabilities
Please carefully note – this is general information only and not intended nor to be construed as legal advice – if you need help with making sure your Orders are done right, or wish to talk about superannuation splitting, get in touch with our Family Law team.
