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July 18, 2023
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Beware Informal Agreements

Don’t be caught out by an informal ‘deal’ on property settlement, make sure you seek advice and protect yourself from future claims.

Paula and Peter were married for 7 years. They had two young children. Paula had given up her career as an Accountant to stay home and raise the children, while Peter put his efforts into generating income for the family through his building consulting business he established at about the same time. The business took a great deal of his time, and Paula helped where she could by answering phone calls, typing letters and keeping the accounts up to date.

When they separated, both Paula and Peter realised it would not be possible for either of them to keep the home. They agreed to sell.

Paula found a property that suited her and the children perfectly – she put pressure on Peter to let her take one half of the proceeds of the sale of their home, so that she could purchase the new property. ‘Peter, just agree to release half to me, the children need somewhere to live. You can take the other half of the money. We can do this without solicitors; we just have to tell the Conveyancer what we want to do with the money. We can just sign something to say that’s what we agree to do. We can write it up ourselves’.

Peter was feeling guilty about the separation, so he agreed. He signed the one page document Paula wrote up and the money was distributed equally.

Both Paula and Peter bought their own properties in their sole names, and they lived independently thereafter.

What Paula discovered many months later was that the deal was not favourable to her – she made a claim against the property Peter had purchased, against his business and his superannuation. Shocked, Peter consulted his Family Law Specialist.

‘I thought the deal was done; we signed a piece of paper which set out the agreement. How can Paula bring this claim against me?’ said Peter.

His Family Law Specialist advised, ‘Peter, I know this is a really challenging situation for you. The deal wasn’t a formal agreement – it was not binding. If you had sought legal advice before the money was distributed, we could have formalised the agreement using the proper documents the Court will recognise.’

Peter was confused. ‘Don’t we have to be divorced before we can deal with a property split?’

‘No,’ said his Family Law Specialist. ‘You can settle property at any time even if you are not divorced. The sooner the property settlement is finalised after separation, usually the better.’

Don’t be caught out by an informal ‘deal’ on property settlement, make sure you seek advice and protect yourself from future claims. For more information call Family Law Matters (02) 9523 3007.