5 Key Matters to Consider in Property Settlement Negotiation

If a relationship breaks down, the parties involved will need to consider what will happen in respect of the division of any property owned, separately or jointly, by them. This is referred to as property settlement under the Family Law Act. It is an important step in ending the financial relationship between the parties.

Negotiating a property settlement

Negotiating a settlement out of Court is preferable for many couples, including costs. Indeed, the Courts require the parties to make a genuine effort to reach a settlement before commencing any Court process. Either way, it is important to be realistic and understand you are involved in an unusual and stressful situation.

Negotiating a property settlement is a major undertaking. It can require considerable effort to reach the optimal settlement for those concerned. It can be a serious error for a party to enter the negotiation process without proper advice, support and an understanding of their legal rights. If you are about to commence negotiations, it is recommended that advice is sought from an experienced family lawyer to ensure you are aware of your entitlements and help progress your settlement. Szabo & Associates Solicitors can help ensure that your property settlement progresses as smoothly as possible.

Set out below are some of the important matters to bear in mind when negotiating a property settlement.

1. Identify the extent of the ‘property pool’

It is important to be clear about the assets and debts are of both partners. This includes superannuation entitlements and other controlled assets, such as a business or property held in a family trust. To do this accurately requires full financial disclosure, and the parties must be transparent as required by the Financial Law Rules. (Recent changes to the law mean that it is harder to hide or under-disclose superannuation assets).

Once financial disclosure has been completed, the parties can then determine the net value of their combined ‘property pool’. Evaluating some assets may need professional advice. This gives a starting point as to what is available for division between parties.

2. What will be each party’s percentage entitlement of the property pool?

Once agreement is reached on the assets and liabilities to be included in the property pool and its net value, negotiations can begin on how the pool will be divided.

It is worth bearing in mind that if the parties cannot reach an agreement, then an application for a property settlement will need to be filed for the Court to decide how the property will be divided. This is case dependent, and no simple rule (such as a 50:50 split) applies. This requires a detailed consideration of the contributions, both financial and non-financial contributions of both parties throughout the marriage and current circumstances. This is potentially complicated (particularly if matters such as inheritances are involved), and professional advice is appropriate.

An important part of the Court assessment will be a ‘sense-check’ as to the parties' future needs and whether the proposed division of property is fair to both parties.

3. What will happen as regards living arrangements and the family home?

An important step for most people in negotiating their property settlement is to sort out their living arrangements. There are several aspects to this.

It may be the case that one partner will have to leave the family home. Individual financial circumstances may apply with one party better placed to find alternative accommodation. That said, many couples finalise property agreements while still living together where it is simply not practical to finance living in separate accommodation ahead of a settlement.

One party may wish to keep the family home. If so, can they afford it? Decisions about retaining what is probably the family’s largest asset should not be an emotional one. Realistically can they qualify for a mortgage on their own? An existing lender will not necessarily simply remove an ex-spouse’s name from the mortgage. So, for example, would the remaining partner be able to afford a mortgage sufficient to buy out the other partner’s interest in the home?

4. If there are children, where will they live and what other arrangements will apply?

Negotiating children’s living arrangements can be particularly difficult and emotional. Nevertheless, an important influence on the negotiated financial arrangements could be which party is to have primary care of the children. One party may receive a higher proportion to reflect the primary carer's financial costs. There are no set rules in this situation, but minimising disruption to children’s lives and schooling would be a primary consideration.

5. Understand and avoid commonly made mistakes in negotiations

Avoiding commonly made mistakes will help when negotiating a settlement that the individual is comfortable with. Among these are:

Not asking for help

Negotiating the future is a stressful process, and seeking timely professional advice can be a key step. An experienced family lawyer can evaluate a client’s position, suggest different settlement amounts and tactics, act as a mediator and ensure everything is documented properly and enforceable. Negotiating on one’s own is possible but not recommended.

Not preparing adequately

Every situation is different and it is important to gather all the facts, what you wish to be achieved, and understand what it is necessary to do before getting involved in a formal settlement negotiation.

Not knowing the value of the asset pool

It is important to keep a clear idea of the financial situation and prospects as this will help determine how much of the assets can be negotiated away as part of a settlement process. Bear in mind, that even if items have equal value on paper, some things will be more important or beneficial than others for an individual in the future.

Contact our Property Settlement Lawyers in Sydney, NSW

The process of negotiating a property settlement can be a considerable and potentially complicated undertaking. Szabo & Associates Solicitors can assist you with your negotiations or advise you on any other aspect of divorce, separation and family law. Please contact us on 02 9281 5088 or fill in the online contact form.