When finalising a property settlement after a separation or divorce, it’s essential to choose the right legal option to make your agreement legally binding. In Australia, there are two primary options: Consent Orders and Binding Financial Agreements (BFA). Although both are designed to formalise the division of assets, they differ significantly in terms of process, legal requirements, and scope.
Consent Orders vs Binding Financial Agreements
Both consent orders and binding financial agreements can be used by married couples and de facto couples. There are time limits for finalising property settlements in family law matters. You and your former partner will have one year from the date of your divorce being finalised if you were married to initiate property settlement and two years from the date of your separation if you were in a de facto relationship.
Choosing the right pathway could save you from lengthy legal proceedings and, more importantly, ensure a fair and lasting division of property and other financial matters. We’ve put together some information to help you understand what is right for your situation—but please speak to a family lawyer who specialises in property matters before initiating financial arrangements to ensure you can make an informed decision.
What Are Consent Orders?
A Consent Order is a legally binding court order that formalises an agreement between separating parties. The name refers to the fact that the orders are made with consent from both parties. In some matters, the courts may have the final say if there are areas that cannot be agreed on, but both parties must consent to the final orders by signing them.
This agreement is usually drafted by lawyers or the parties involved, who negotiate through private discussions, mediation or in dispute resolution. Complex matters may require the assistance of financial and taxation specialists.
Consent orders can cover property settlement, spousal maintenance, and also parenting arrangements if necessary. Both parties agree on the division of assets, and the agreement is submitted to the Federal Circuit and Family Court of Australia for approval. The court reviews the proposed orders to ensure they are “just and equitable” before issuing a formal court order.
Process of Obtaining Consent Orders
Obtaining consent Orders involves deciding on how assets will be split and parenting matters will be managed. Some people create a parenting plan and a proposed financial agreement, and others will work with a legal practitioner to do this on their behalf. An Application for Consent Orders, along with supporting documents like the Minutes of Consent and financial disclosures will then be submitted to the court.
The court approval process is completed without the need for a formal court hearing, making this a more streamlined and cost-effective option. There is no need to attend Court for the Orders to be made and the Registrar attends to making the Orders in Chambers. Should the Registrar require more information in their role in assessing the agreement, parties may be required to provide further information to the Court by way of an Affidavit.
A trial will only happen in a very small percentage of matters when parties cannot agree on the proposed consent orders or where matters are being disputed in terms of duty of disclosure or parenting arrangements.
Spousal Maintenance – Binding Financial Agreements vs Consent Orders
Whilst a Consent Order finalises the property settlement entitlements of the parties and prevents either party from making a property settlement claim against the other parent, such document does not finalise the spousal maintenance obligations of the parties.
A Binding Financial Agreement finalises not only the parties’ property settlement entitlements but, unlike Consent Orders, may also finalise their spousal maintenance entitlements.
What Are Binding Financial Agreements?
A Binding Financial Agreement (BFA) is a private contract between the parties that can be made before, during, or after a marriage or de facto relationship. Unlike Consent Orders, a BFA doesn’t need to be submitted to the court, which can allow couples greater privacy. However, it is mandatory for both parties to receive independent legal advice before signing, and this must be confirmed in writing.
A BFA is particularly useful if the parties want to avoid court involvement altogether. It can cover property settlement and spousal maintenance, but not parenting matters. The agreement serves as a legally binding agreement and aims to finalise financial matters between the parties. However, a BFA is more susceptible to being overturned by the court if it’s deemed unfair or if certain conditions, like fraud, duress or non-disclosure, are proven.
What Are The Key Differences Between Consent Orders and Binding Financial Agreements
- Court Involvement: Consent Orders require court approval, whereas Binding Financial Agreements do not.
- Legal Advice: Legal advice is mandatory for a BFA but not for Consent Orders – but it’s still wise to get legal advice before signing any agreement.
- Scope: Consent Orders can cover both property settlement and parenting matters, while a BFA is limited to financial matters. An informal agreement such as a parenting plan, or consent orders for children’s matters can be made at the same time as BFAs.
When Are Consent Orders the Better Option?
Consent Orders are often preferred when the parties wish to finalise not only their financial matters but also their parenting arrangements in one comprehensive document. This is especially useful if the parties have children and wish to formalise Parenting Orders alongside the property division. Since Consent Orders are court-approved, they carry a layer of security that can prevent future disputes.
What is a Just and Equitable Division of Assets?
The Family Law Act 1975 mandates that any agreement regarding property matters must be “just and equitable”. This means that the court will assess more than just the percentage division of assets. They will look at factors such as the liquidity of assets and the future needs of each party. For example, the court is unlikely to approve an agreement where one party receives all the cash and the other party receives only superannuation entitlements. A superannuation split is often used to ensure fairness.
Advantages of Consent Orders
- Court Oversight: Consent Orders are reviewed by the court, ensuring they are just and equitable.
- Comprehensive: They can cover both financial matters and parenting arrangements.
- Enforceable: They carry the same weight as orders made by the court after a contested hearing.
- Cost-Effective: As there’s no need for a court hearing, the process is less expensive.
Disadvantages of Consent Orders
- Court Involvement: Although no formal hearing is required, some parties may prefer to avoid court involvement altogether.
- Legal Fees: While legal advice isn’t mandatory, it’s recommended, which may incur additional costs.
When Is a Binding Financial Agreement More Suitable?
A Binding Financial Agreement may be more appropriate if both parties wish to maintain privacy and avoid court proceedings. It can be a more flexible option for couples who want to settle their financial matters privately. It’s also often used in situations where prenuptial agreements are made or when couples want to “contract out” of the court system altogether.
Advantages of Binding Financial Agreements
- Privacy: No need to submit the agreement to the court, allowing for more discretion.
- Flexibility: Couples can structure their financial settlement to suit their needs without the limitations of court approval.
- Avoiding Court: A BFA allows the parties to resolve their financial relationship without any court involvement.
Disadvantages of Binding Financial Agreements
- Easier to Overturn: Since there’s no court oversight, BFAs are more vulnerable to being set aside if they are deemed unfair or if certain legal principles, like fraud or non-disclosure, apply.
- Mandatory Legal Advice: Both parties must receive independent legal advice, which adds to the cost of finalising the agreement.
Why Independent Legal Advice is Crucial
For Binding Financial Agreements to be legally binding, each party must obtain independent legal advice. This ensures both parties fully understand the terms of the agreement and its potential consequences, such as limiting future claims for spousal maintenance or property matters. The legal advice must be certified and attached to the agreement for it to be valid.
Can Consent Orders or a Binding Financial Agreement Be Set Aside?
Both Consent Orders and Binding Financial Agreements can be set aside under certain conditions:
- Fraud or Non-Disclosure: If a party fails to disclose their full financial circumstances, such as hidden assets, the agreement can be overturned.
- Impracticability: If it becomes impracticable for a party to fulfil their obligations, the court may set aside the agreement. An example would be a party unable to make a required lump sum payment due to unforeseen financial difficulties.
- Exceptional Circumstances: If there are significant changes in the care of a child, such as a complete reversal in living arrangements, the court may set aside the agreement to prevent hardship.
- Proceeds of Crime Order: If the property involved is subject to a Proceeds of Crime Order, the agreement can also be overturned.
A binding Financial Agreement can also be challenged based on contractual principles, such as whether it is void or unenforceable or whether one party engaged in unconscionable conduct.
Get Help with Your Property Settlement Today
Deciding between a Consent Order and a Binding Financial Agreement can be complex. Our experienced Family Lawyers can help you navigate the process and ensure your agreement is fair and legally binding. Contact us today for a free 15-minute consultation to discuss your property settlement, spousal maintenance, and parenting matters. We’re here to provide the right advice for your unique circumstances.
Legal Services Provided by Advance Family Law
Property Settlement – We provide advice in all property settlement matters whether parties are married or a party to a de facto relationship
Dispute Resolution – It is always in the best interests of all parties involved in property settlement disputes, particularly the children, if an agreement is made between parties to settle such matters in an amicable manner and this is always the goal we have for our clients at Advance Family Law.
Child Custody Law – We can help you understand your rights and obligations around child support
Domestic Violence – We can assist you in navigating your way through domestic violence issues
Family Law Advice – Call now and speak to our Specialist Family Lawyers for family law advice, so you know where you stand.
Brisbane Divorce Lawyers—We find that people usually prefer to obtain their own Divorce by preparing and filing the Application for a Divorce and appearing at the Divorce Hearing, if necessary. This allows them to focus their financial resources upon their domestic violence, parenting, and/or property settlement matters.