Surviving your Divorce: Chapter 5- De Facto Relationships

Because Australia was first a collection of States each with their own laws, and in 1901 became a nation, with the States giving certain responsibilities to the Commonwealth, there has been a loop-hole in the administration of the law relating to couples, for many years.

The laws relating to “marriage”, were given by each State to the Commonwealth in 1901.  The laws in relation to unmarried couples weren’t.

In the early 90’s this was rectified by the States giving this jurisdiction voluntarily to the Commonwealth.  Unfortunately the High Court ruled that is was not done correctly. 

This meant that State Court, which was ill-equipped to deal with de facto couples, had that jurisdiction thrust back upon them.

This has now been rectified again, correctly and permanently, in 2009, with the practical effect that de facto relationships are now dealt with by the Family Court, as they should always have been.

What this means is that, if you are in a de facto relationship for the required period of time, (two years currently), then the rules relating to you and your ex will be the same as if you had been married.

Unsurprisingly, this is a new area of the law and even the most basic items are often disputed.  Even the issue of whether a relationship exists is the cause of heated debate in many cases.

Surviving your Divorce: Chapter 4- Divorce (Dissolution of Marriage)

The word “Divorce” covers a whole range of things, so far as the general public is concerned. 

In fact, in legal terms, a divorce is only one small (and often irrelevant), part of the process. 

A dissolution of your marriage (the technical expression for a divorce), is in effect, the undoing of the marriage ceremony itself, allowing you and/or your Ex to remarry. 

The vast majority of people don’t worry about this process, and don’t bother with a dissolution of marriage.  It can be costly (over $3,000.00 by the time the filing fee and other fees are paid), and really doesn’t assist you unless and until you are going to line up again for marriage, or unless there is a tactical advantage in a property settlement dispute.

Some people see it as a formal step to be taken, to obtain the satisfaction of knowing that, “it’s over”, and they can commence their lives again. 

Others take the view that finding the Ex at a later stage to undertake a dissolution might be difficult, and that it is “better to get it over with now”. 

Sometimes, there is a benefit to be gained from a divorce.  Occasionally, if you have the right circumstances, a divorce can gain you a major benefit.  A divorce starts a time limit running on division of property.  You must start court proceedings for division of property within 12 months of a divorce.  If that action is not started then the property will be divided along the lines of their ownership on titles or if owned jointly, will be fifty/fifty.

You can see how, in some circumstances, this would be to the advantage of one party or the other. 

1.         WHAT IS REQUIRED FOR A DISSOLUTION?

The only major requirements for a dissolution of marriage are:-

(i)            Twelve months of separation; and

(ii)           That suitable arrangements have been made for any children involved.

You will also be asked to dig out your old marriage certificate. 

An Application is then made to the Court.  Usually there is no need for you to appear on the Court day. 

At that Court return date, all being well, the Court will issue a “Decree Nisi”.  This is a provisional Divorce Order.  There is then a period of thirty days for objections, after which the Decree Nisi becomes absolute, and you are free to remarry at any stage after that time. 

Strangely enough though, disputes occur. 

The most common dispute revolves around the separation period and when separation first occurred. 

Given the nature of relationships, pinpointing this date could be rather difficult, and is often the subject of bitter argument. 

Short periods of reconciliation are allowed and are taken into account when calculating the twelve months of separation. 

Interestingly, the parties can also be “separated under the one roof”.  That is, separation does not need to be marked by one party leaving the house. 

It is not uncommon for separations to occur gradually, where one may in fact leave the main bedroom, or where the relationship breaks down without anyone changing address. 

There are fairly well established rules for determining when separation has occurred under the one roof, and this may start the twelve months separation period early, allowing divorces to be obtained sooner. 

Joint Property Investments- Getting Out

Many investment agreements between people start off as a good idea. 

People with seemingly similar interests and strategies, who know and trust each other, will agree to join forces to buy a property, and often these arrangements will work well for many years. 

What happens though when one party wants out? 

It is a commonly held belief that for one investor to have the property sold, there must be unanimous agreement. 

This is not true. 

In fact the opposite applies.  Any single investor in a group (in the absence of a Joint Venture Agreement to the contrary), can trigger the sale of the property, by notice to the others. 

Often this is quite a shock for the others, who do not understand, until they take advice, that they cannot force an investor to remain in a joint investment, until all parties are ready to sell. 

So what are the steps in the process when one investor wants out?

The first step is for the departing investor to give notice of the intention to get out of the investment.  If there is a Joint Venture Agreement, then the rules of process and terminology will be set down in that agreement.  If not, then these rules apply. 

The parties will then have some discussion about the options, which, broadly are:-

A.           The remaining investor(s) will buy out the departing investor; or

B.           The property will be sold. 

Usually this depends upon:-

(a)          The value of the property, the equity in it;

(b)          The finance arrangements;

(c)          The economy and saleability of the asset. 

VALUATION

One of the most critical determining issues is the value of the property.  

There is obviously a conflict of the interests of the departing investor against the remaining investor (the departing investor wanting the price as high as possible, the remaining investor(s) as low as possible).  It is important not to press this difference to a ridiculous end.  It is quite open to one party to say, either, “Well if you think the price should be that low, you sell it to me for that amount and you go”, or alternatively, “If you think the price should be that high you buy me out at that price and I’ll go”.  It is very difficult to back-track from a position such as this. 

It is open to the parties to agree a value.  If they cannot, then a Valuer can be engaged. 

There are subtle variations on the valuation process:-

(i)           A Valuer is appointed by agreement between the parties and the parties accept that valuation;

(ii)          Each party gets their own Valuer, and the value agreed is the average of the two opinions;

(iii)         A disinterested independent party (often the President of the State Law Society), appoints a Valuer;

(iv)         One party will propose a panel of three or more Valuers, from which the other will choose. 

It is important to seek a formal agreement when the Valuer is appointed, that both parties will abide by the valuation.  This is not an automatically accepted process.  It is reasonably common for a party aggrieved by a valuation, to attempt to renege upon the acceptance of the figure provided. 

Once the valuation is agreed, an agreement for the transfer of the departing investor’s share can be made.  Even if you are not the departing investor, it is important to ensure that you take taxation advice on the transaction, as it may have consequences even for the continuing investor(s). 

If the parties cannot reach agreement or if neither can afford to buy out the other, then the departing investor has a right to have the property sold. 

It is important to agree the format and pricing of the sale process.  Again, a value (list price and minimum sale price (or reserve) if there is an auction), needs to be agreed.  An agent and sale process also needs to be agreed. 

In the event that all of these things cannot be settled and completed between the parties, the departing investor has the right to apply to the Court to appoint a “Statutory Trustee for Sale”. 

A Statutory Trustee for Sale, usually an Accountant with an Insolvency speciality, will be appointed by the Court with instructions to sell the property. 

From the moment this Order is made, both parties lose control over the process.  Once the Trustee is appointed, neither party can interfere, complain or influence the process.  The Trustee will simply sell the property and divide the proceeds.  Both the costs of the Application and the Trustee’s costs are taken out of the sale proceeds before distribution to the investors.  This can be an incredibly expensive process, but is also a quite handy and useful threat for a departing investor. 

DOCUMENTATION

In order to avoid the process breaking down and time and money being lost, it is essential to record the various stages of negotiation, and to finalize an agreement for the dissolution of the investment process. 

There are subtle variations on the process above, depending upon the structure of the investment (partnership of individuals, Company Trusts or more complex partnership arrangements), but the methodology is essentially the same regardless of the complexity of the investment vehicle.