Many couples do not consider what will happen to their assets if they separate, instead relying on their partner to “do the right thing” or “stay true to their word” should they break up. Unfortunately in many cases promises made in in the absence of an official Property Sharing Agreement will not be honoured.
One of the questions we ask people when they first come to see us about their separation is whether they have signed any agreements about property rights. This might be at the beginning of the relationship or during it. There might be an inheritance received during the relationship that prompts a discussion around an agreement.
It is always hard when we have to tell a client that the “agreements” they thought they had regarding pre existing assets, bank accounts or inheritances are unlikely to be honoured and if they are not there may be nothing we can do to save the asset as separate property.
To be binding there are certain formalities that are required in the Property (Relationships) Act. For instance they must be in writing, completed through lawyers, one for each party from different firms, and there must be disclosure of assets and liabilities and an absence of pressure.
A Court does have the discretion to give effect to an agreement that has not met the formalities of the Act if it is satisfied that non-compliance has not materially prejudiced the interests of any party to the agreement.
In one famous case the wife’s comments that “it’s your house, you own it” was not enough on a later separation, nor was a comment in another case that the husband would leave his wife “the lot”.
Even if an oral agreement is found to exist, the Court will not give effect to it if there is material prejudice to one of the parties. If a careful lawyer would have advised against entering into the agreement then it is unlikely to be given effect to.
On rare occasions an oral agreement might be upheld. One such case concerned a couple who came together already with their own assets. The wife asserted there was an oral agreement that she would retain her house and her husband would retain any property he purchased, even if she helped with the purchase. In this case the Court found that had the parties taken advice they would have entered into an agreement.
Hindsight is a wonderful thing. Rather than learning from it at a later date if there are assets that you want to keep separate should you and your partner separate then you should be entering into a properly executed agreement and removing doubt. If you have some concerns or questions in this area then please contact our Relationships Team on +64 3 339 5644.