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10. De Facto Property Settlement

Following the breakdown of a de facto relationship there are often parenting and property issues to work out.

Parenting issues will always come under the umbrella of the Family Court, please refer to the relevant Fact Sheets on parenting for more information on this area.

Property settlements however cannot be undertaken in the Family Court under current laws, for any couple that is not married.

Essentially, there are two ways to effect a property settlement in de facto relationships:-

1. Via a written agreement, called a Termination Agreement
2. By application to the Court to seek Orders

Agreements in De Facto Matters

Following the breakdown of a de facto relationship, an agreement can be drafted and executed by each of the parties to make the proposed arrangements legally binding.

These agreements are called Termination Agreements and are essentially a contract between the two parties that is signed and served on each other.  Each of the parties obtains their own independent legal advice prior to signing the agreement. Once exchanged, the agreement is binding immediately.

Please contact us if you wish to discuss a Termination Agreement in more detail.  We find these are by far the most cost effective way to divide the assets in de facto relationships.  This type of agreement can also cover both heterosexual and same sex couples.

Court Applications

In cases where parties are unable to reach an amicable agreement, a Court application is required.  There are a number of avenues available to assist in obtaining Orders:

1. The Property (Relationships) Act.  This is the most common avenue to seek property settlement and applications are made in the NSW state courts, depending on the size of the property pool.  See below for more detail on this area.
2. The Conveyancing Act.  This provides a mechanism for the resolution of disputes between the joint owners of property.  It would be possible for a joint owner of property to bring an application under this legislation seeking an Order for sale of the property and payment of any liabilities from the proceeds of sale, and to then seek Orders providing for the division of the balance of the proceeds of sale.
3. The Supreme Court has a general equitable jurisdiction.  This enables the Supreme Court to deal with any other matter which may or may not fall within the parameters listed above.  As a general rule, this type of application is quite expensive and is only ever used in cases where the other two options are not available.

Time Limits

There is a time limit in which to make applications for property adjustment under the Property (Relationships) Act and any application for property adjustment must be brought with two years of the relationship terminating.

If a claim is not brought within two years of the relationship terminating then it is necessary for the Court's leave (or permission) to be sought before proceedings can be instituted.  Leave is not granted automatically and may be refused. 

Property Adjustment in a De Facto Relationship

In dealing with any application under the Property (Relationships) Act the Court generally adopts a two stage approach, namely:

1. To identify and value the assets that are in existence and in dispute.
2. To then assess contributions that have been made by both parties.  In this sense contributions can be made as either:
   (a)        Financial contributions (through the introduction of funds whether at the commencement of the relationship, through wages or otherwise);
   (b)        Non-financial contributions (such as being an owner builder or home handy person); and
   (c)        Contribution as a homemaker and parent (whether to the children of the relationship or to a child who resided with the parties and was accepted as a child of the household during the relationship).

It is open to the Court, depending upon the facts and circumstances of any case, to make such findings as are appropriate regarding the contributions that each party has made, this includes both financial and non-financial (homemaker) contributions.

The Court's jurisdiction to make orders for property adjustment is a discretionary one and it is necessary for the party seeking to vary the present ownership of property, or seek a sale, to satisfy the Court that it is necessary and appropriate so as to achieve a "just and equitable" division of property as between the two parties.

Law Reform Proposals

At present your matter would be dealt with in accordance with the Property (Relationships) Act 1984 as set out above.  This is a piece of State legislation administered through State Courts.

Recently, the Rudd Government has tabled a Bill in parliament that will see de facto property matters come under the Family Law umbrella.  Once enacted, this legislation will have significant effects for de facto couples when looking at property settlements.

Please contact us if you require more information about this important reform.

Debts in De Facto Relationships

The Court's jurisdiction under the Property (Relationships) Act is to adjust interests in "property".  The Court cannot, accordingly, make any effective Order which adjusts interests in debt.

In making Orders regarding any asset, the Court will take any attached or associated debt into account (so, for instance, if the house was encumbered by a mortgage then the Court will ensure payment out of the mortgage and deal with the nett equity of the parties that remains).

The Court has no real power to make Orders with respect to payment of debts independently of their power to deal with property.  Accordingly, if debts exceed available property (and there is then no property or no funds to meet the shortfall in debts) then the Court cannot interfere in any arrangements regarding the debt between the persons liable for the debt and the lender (ie whoever’s name the debt is in will remain liable for its payment and the Court cannot shift the burden for the debt).