Property Division – The Details
Property Division – The Details
The Family Law Act provides for property division for both formerly married couples, as well as de facto couples. There are two main goals when it comes to property division. First, this should be a step towards finalising the economic relationship between the parties. This “clean break” principal is supported by the requirement that courts make orders that will end the financial relationship of the parties as far as practicable. Second, this process recognises contributions to property, both financial and non-financial.
An action for property division must be brought timely. For instance, if you were formerly married you must bring any property proceedings within 12 months of when your divorce order became absolute. Alternatively, if you were in a de facto relationship, you must seek property division prior to two years after the end of the relationship
The court maintains broad discretion when it comes to making property orders. For instance, should the parties disagree as to the ownership of property, the court has the discretion to make a declaration regarding the property in question.
Even the language in the Family Law Act speaks to this notion that the court has an abundance of discretion; the exact language expresses that the court may make “such order as it considers appropriate.” This broad discretion is subject to seven restrictions/considerations the court must contemplate. These considerations listed below are enumerated in the Family Law Act.
- the direct and indirect financial contributions of the parties
- the non-financial contributions of the parties
- contributions to the welfare of the family, including contributions as homemaker or parent
- the effect of any order on the parties’ income earning capacity
- the list of considerations in s 75(2) and 90SF(3) of the Family Law Act
- any other order made under the Family Law Act affecting a party or child of the marriage or de facto relationship
- any child support payable, or likely to be paid in the future
Finally, the last bit of guidance that the Family Law Act offers to the court, is that the court shall not make an order unless the circumstances indicate that it is both just and equitable to make the order.
Because the Family Law Act fails to provide strict guidelines with regard to property division, and the courts are given such broad discretion, the courts have adopted a four-step process to apply to property orders. First, the court must identify and value the property, then consider contributions of the parties, then consider the factors listed above, and finally consider whether the order is just and equitable.
Step One: Identify and Value Property
The court must identify and value a rather encompassing pool of property, which includes real property, assets, liabilities, financial resources, property presently possessed and property expected, as well as property disposed of. The court must also identify and value business interests, licenses, permits and professional qualifications, inheritances, insurance policies, among many other types of property. As you can see, the type of property is pretty much anything – the list is rather extensive.
Both the nature of the property as well as the value must be determined as of the date of the decision, rather than the date of separation or divorce. When determining the value of the property, the court will begin by considering the fair market value of the property. Fair market value generally refers to the amount that a willing (not anxious) purchaser who is adequately informed would pay a willing (not anxious) seller of the property. In some instances where there is a dispute as to the value of property, and the court cannot make a determination of the value, the court may order the property be sold.
Once the property has been identified and value, a simple formula is used to determine the net asset pool of the parties. The total assets minus the total liabilities will result in the net asset pool used by the court.
Step Two: Contributions
The court will consider financial contributions, non-financial contributions, contributions to the care and welfare of the family, and contributions in the capacity of homemaker or parent. Financial contributions are any monetary contribution related to acquisition, conservation, and improvement of the property and refers to contributions made before the marriage, during the marriage, and after separation. On the other hand, an example of a non-financial contribution would be where one party performs maintenance or renovations of any family asset.
Often, especially when considering long relationships, the court will make a determination that the parties contributed equally. However, each situation is unique, and may not call for a determination of equal contribution. The court can make necessary adjustments to account for your unique circumstances.
One situation that is given special attention with regard to contribution is violence. If violence during the marriage or relationship had an adverse impact on a party’s contributions to the marriage, the judge will consider this when assessing the respective contributions of the parties.
Step Three: Additional Factors
This step helps the courts in addressing the future needs of the parties. The court will consider all relevant factors, including but not limited to:
- the age and state of health of each party,
- the income, property and financial resources of each party and their physical and mental capacity for achieving gainful employment,
- responsibility for a child of the marriage who is less than18 years old,
- commitments necessary for a party to support themselves or to support any other person that the party has a duty towards,
- eligibility for a pension, allowance or benefit,
- the standard of living which is reasonable in the circumstances,
- whether the relationship has affected the earning capacity of a party and to what extent,
- if either party is living with someone else, the financial circumstances arising from cohabitating with another person,
- the terms of any Orders made in relation to the property of the parties and the terms of any binding financial agreement.
Step Four: “Just and Equitable”
The last step in the property division scheme requires to court to ensure that the proposed order is both just and equitable. This step is intended to allow the court to take a step back from the proceedings, and a whole, determine if the order is appropriate. The order should only be finalised if it is fair for each party. What is fair for one couple may not be fair for another couple, and thus determining fairness is wholly dependent on the circumstances of each individual case.
Variations of Property Orders
Despite the objective of ending the economic ties between the parties, property orders may in fact be varied after they have been issued. Variations are only permissible under certain circumstances. The Family Law Act only allows for reconsideration of a property order where both parties have consented, or where one party makes an application and the court is satisfied that at least one of the following is applicable:
- there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, etc.
- circumstances have arisen since the order was made that has rendered it impracticable for all or part of the order to be carried out
- a person has defaulted in carrying out an obligation imposed by the order, and as a result it is just and equitable to vary or set aside the order
- circumstances have arisen since the order relating to a child or the marriage or relationship, and hardship will occur if the order is not set aside or varied
- a proceeds of crime order concerning property of the marriage or relationship, or such an order has been made against a party to the marriage or relationship.
Should you be in a situation where you anticipate property division, the best thing for you and your former partner to do is to work through steps one through four before bringing property proceedings. This will often help you avoid having to go through litigation to arrange for your property division.