In most cases when a couple separate it is important that they sign a Relationship Property Agreement (also known as a Separation Agreement) that complies with the requirements of the Property (Relationships) Act 1976 (“the Act”).
The essential requirements to ensure that a Relationship Property Agreement complies with the Act are as follows:
- It must be in writing.
- Proper disclosure of all significant assets and their value is made by the parties.
- Both parties must receive independent legal advice.
- The Relationship Property Agreement must be certified by the lawyer after having provided the independent legal advice.
If these requirements are not met, then any agreement reached will not be binding on the parties.
Sometimes couples who are separating decide not to seek legal advice and divide their assets between themselves, often to avoid what they consider to be unnecessary legal costs.
However, this can be very risky. One client, whom I will call Greg, separated from his partner Cindy eight years ago. At the time they separated, Cindy and Greg arranged for a valuation of the home they owned together and agreed that Greg would retain the home and would pay out Cindy her half share of the property.
They signed an agreement for sale and purchase and arranged for a lawyer to do the conveyancing, transferring Cindy’s half share of the property to Greg. Greg paid Cindy $35,000.00 which was a half share of the equity in the property based on the valuation obtained at the time.
Eight years later, the property market was red hot and the property that they had owned together had increased significantly in value from $350,000.00 to $720,000.00.
Greg was shocked to receive a letter from Cindy’s new lawyer, eight years after they had separated, claiming a half share of the market value of the property and threatening court proceedings if he did not agree.
Greg consulted with his lawyer, who told him that, because he and Cindy had not signed an agreement that met the requirements of the Act, there was a very good chance that Cindy would succeed in a claim for a half share of the increased value of the property.
Greg therefore had little option but to enter into negotiations with Cindy to reach a settlement with her. He ended up having to pay her a half share of the increased market value, less adjustments for rates, insurance and improvements that he had carried out to the property since separation.
It is therefore very important, even if you and your former partner have agreed on how you want your assets divided, that you enter into an agreement that complies with the Act so that you are both protected against any future claims.
