Final property orders in an uncertain market
It is standard practice in family law for final property orders to provide for assets to be sold to effect a financial settlement between parties.
But what if you and your former partner have agreed to a final division of your property (by way of final orders, a financial agreement or arbitration award) and when it comes time to sell the property, the market has drastically changed?
The recent case of Jancos & Abelas [2020] FCCA 459 provides an illustration of the issues that may arise if, at the time of sale, a property sells for far less than its anticipated or the agreed value.
In this case, the parties had attended an arbitration to determine their final property settlement. Following the arbitration, the ‘award’ (the document setting out the financial settlement between the parties) was registered with the court with the consent of both parties.
To effect the financial settlement, Mr Abelas was required to pay Ms Jancos the sum of $630,000 in exchange for retaining two real properties. When it came time to pay Ms Jancos, Mr Ableas discovered that he was unable to refinance and fund the payment. The effect of the award required the real properties to be sold in the event Mr Abelas was unable to make the required payment to Ms Jancos.
At the time of arbitration, the parties had agreed that the first property was valued at $800,000. At auction, the property was sold for $455,000. Importantly, the arbitrated settlement did not contain a “rise and fall” provision, meaning that the entitlement of Ms Jancos from the proceeds of sale of the property were a fixed sum (rather than a percentage) that was not increased or decreased dependent on the sale price of the property. In effect this left Mr Abelas with a far smaller division of the assets between the parties than he had anticipated.
Mr Abelas then attempted to have the arbitrated settlement set aside. However, it was held that the lack of a “rise and fall” provision, to adjust the entitlement of either party in the event of an unexpected sale price, was not grounds for appeal.
Why is this important?
When entering into a final property settlement it is important that your interests are protected. The case of Jancos & Abelas is an important illustration of the eventual effect of a settlement being vastly different to its intention.
If you are considering entering into a final property settlement it is important that you obtain specialist advice as to its potential effect, not just intended, particularly in the current uncertain economic climate due to the COVID-19 pandemic.
If you require assistance to formalise a agreement reached with your former partner, or would like to discuss your options, please contact one of our team members on 03 9070 9839 or info@sagefamilylawyers.com.au
