The Property Mistakes That Cost You When a Relationship Ends

Most people don't think about what happens to their property in a separation until they're already in one. In this episode of Property, Straight Up, Mel Dennis talks with Claire Walczak, an accredited family law specialist and partner at Lander & Rogers, about property settlements, binding financial agreements and the mistakes that end up costing people the most.

Claire explains why having property in your name doesn't make it yours, why a 50/50 split is far from guaranteed, and why an informal agreement can come back to bite you. She also shares why mediation often beats court, how a Vendor Advocate can lower the temperature during a property sale, and what a binding financial agreement is really for.

Connect with Claire Walczak, Lander & Rogers

https://www.landers.com.au/legalservice/family-and-relationship-law

Property, Straight Up is brought to you by Domain & Co, Your Property People. domainandco.com.au

Timestamps: 

00:00 Introduction

00:25 Meet Claire Walczak, Lander & Rogers

01:11 Claire's role and areas of expertise

02:10 How real property is handled during separation

03:15 Selling vs. retaining the family home

05:19 Who gets to stay in the family home?

06:29 The biggest misconceptions people have about property and separation

08:10 Does separation always mean going to court?

09:57 How to avoid unnecessary disputes and reduce legal costs

11:16 How a Vendor Advocate can help during a property sale

12:28 How independent guidance reduces stress and conflict

13:24 Binding financial agreements explained

14:10 How a BFA protects wealth if a relationship ends

15:27 How to have the BFA conversation with your partner

16:05 Are attitudes toward these agreements changing?

16:51 Think of a BFA as an insurance policy

17:12 When should you seek legal advice?

18:13 The one thing to do to protect yourself and your family

19:07 Closing thoughts and free checklist 

Transcript

SPEAKER_00 0:00

One thing I've learned after nearly 30 years in property is that behind every property transaction there's a story, a big decision, and often a lot more emotion and complexity than people expect. This podcast is all about giving you access to the people, insights, and strategies behind smart property decisions so you can make better moves, whether you're buying your first home, investing, selling, downsizing, or planning your next step. Welcome back to the Melbourne Property Brief with Mel Dennis. Today we are talking about something that can feel uncomfortable to discuss, but is incredibly important when it comes to protecting both people and property, and that's family law, separation, and binding financial agreements. Because while no one enters a relationship expecting it to end, having the right conversations and structures in place early can make a significant difference if circumstances ever change. I'm joined today by Claire Walzak, partner at Landa and Rogers. Works closely with individuals and families regarding separation, property settlements, and wealth protection and brings a really practical and balanced perspective to what can often be very emotional time for people. Claire, thank you so much for joining me. Thank you, Mel, for having me today. Claire, can you tell us a bit about your role and the types of situations you typically help people through?

SPEAKER_01 1:17

Sure. So I'm an accredited specialist in family law. And as you said, I'm also a partner at Landorum Rogers in our Melbourne office. I advise my clients on complex family law matters arising out of a separation or divorce in relation to property and parenting matters, child support, spousal maintenance, and also sometimes family violence matters. I also work with my clients to provide advice at the beginning of a de facto relationship or prior to a marriage in respect of binding financial agreements, which are often referred to as BFAs or prenuptial style agreements. And the best part of my job is empowering my clients to move on to the next chapter of their lives, both emotionally and financially.

SPEAKER_00 2:03

When relationships break down, Claire, property is often one of the biggest and most emotional parts of the process. How is real property typically dealt with during a separation?

SPEAKER_01 2:14

Real property is probably one of the most common types of property that we deal with as family lawyers. So often we will be dealing with a family home, often referred to as the former matrimonial home. Families may have investment properties, they might be running a business of a commercial premises, etc. So there are a number of different ways that we deal with real property in family law matters, and that often depends on whether we're dealing with the real property on an interim or a final basis. So, firstly, in some cases, parties might agree that the property needs to be sold. And that might be because they simply don't wish to retain the property, or they may not be able to afford to do so given their respective property settlement entitlements. Now, in that instance, if there does need to be a sale of the real property, the parties will need to agree on the process for sale. So that includes engaging a real estate agent, agreeing on the mode of sale, is it going to be by way of an auction or private sale, the reserve price, who's the conveyancer going to be, and then obviously the distribution of sale proceeds. Now, if a sale of the property occurs on an interim basis and there hasn't been agreement as to the distribution of sale proceeds either on an interim or final basis, it might be that either party's solicitor needs to hold the monies in trust pending that final resolution. If the real property is held in one party's name, then it might be that we need to advise our client to lodge a caveat against the property to protect that party's interest and to avoid a fire sale of that particular asset. Secondly, in relation to real property, it might be that either party wants to retain the real property as part of their overall property settlement entitlements, and the court can make an order for that to occur. So in that instance, the parties need to agree on the value of the property that they are retaining, and they can do that by way of agreement between the both of them, and that might be with the assistance of, say, market appraisals that they obtain through real estate agents, or if they can't agree, then they will have to obtain a written sworn valuation. We sometimes see disputes in relation to who is retaining the former matrimonial home. And in that instance, a court might need to become involved to make an order as to whether the property is to be sold or whether one party is ultimately going to retain that property. And in those cases, the court will often try to see that one party retains the property, particularly where that party has been residing in the former matrimonial home since separation. And if there's a child or children residing in the home, obviously to provide that ongoing stability for the children. Then on an interim level, when we're dealing with real property, an issue that often arises upon separation is who has sole use and occupation of the former matrimonial home. So this is an issue that does come up a lot for us as family lawyers. And it's really critical if you are wanting to leave the family home upon separation that you first obtain legal advice before doing so. Because if you don't, by having left the home and giving up that sole use and occupation, that might jeopardize your position on a final basis. So that's really, really critical. Another legal avenue to obtain sole use and occupation of the family home is if there has been family violence and the applicant obtains what's called a family violence intervention order, which then prevents the respondent or may prevent the respondent from coming within a certain number of meters of the family home.

SPEAKER_00 6:21

Claire, from your experience, what are some of the biggest challenges people face when trying to navigate the property decisions during separation?

SPEAKER_01 6:29

Sure. So probably the first thing that comes up quite a bit for me is people believe that because the property is in their name, that it means it is their property when it comes to separation. And that's not the case. Legal title does not reflect whether something goes onto the balance sheet. Property is defined very broadly for family law purposes, and all property will go onto the balance sheet, whether it's in sole name, joint names, held by a trust or a business, it all goes onto the balance sheet. Secondly, this comes up a lot as well. There's a misconception that there is an automatic right to a 50-50 or equal division when it comes to property settlement. The reality is that's not correct. Each case will turn on its own facts, and we have to go through the proper process for determining property settlement entitlements. Thirdly, some clients come to me having entered into informal property settlement agreements. Now, unfortunately, informal property settlements are not legally binding or enforceable. And in some of these cases, my clients have been served with a court application for property settlement, whereas they may have thought they had already entered into a property settlement and divided their assets accordingly. So they are then required to enter into what they deem to be a second property settlement to divide their assets, which obviously comes at a significant legal expense.

SPEAKER_00 8:05

So a lot of people assume separation automatically means going to court, but that's not always the case, is it?

SPEAKER_01 8:13

No, it's not. So for many of my clients, they will come in for an initial consultation, they will receive advice, and then they will go away and negotiate with their spouse for a property settlement. And they will come back to us to simply document that property settlement either by way of consent orders that we register with the family court or by way of a binding financial agreement, and that's a post-separation binding financial agreement that I'm talking about. So that happens quite regularly. Then in other cases, clients might need a little bit more assistance to negotiate the property settlement, and we might agree to mediate. So many of my cases end up in private mediation. There is now a requirement by the court in both property and parenting matters that parties attend mediation before they actually issue court proceedings. So we are absolutely seeing more and more cases go through mediation. And then in some instances, there are cases that do require litigation. And that could be for a myriad of reasons. But for example, where one party is not disclosing their financial position, we might need to access the court to get financial disclosure, or where simply the parties have exhausted the negotiations and it's just not going to go any further. However, if you do have to issue court proceedings, there are still many opportunities to settle the matter. And it's only very, very few cases that will end up at a final hearing or trial.

SPEAKER_00 9:49

So staying out of court sounds like a good thing for the majority of people because that's obviously where a lot of the cost comes into it. What are some of the ways people can avoid unnecessary disputes and work towards a resolution more constructively?

SPEAKER_01 10:03

Going back to mediation would be my number one point. So engaging in mediation as early as possible. Secondly, in relation to property settlement matters, ensuring that there is full and frank financial disclosure of assets at an early stage in the negotiations. That's really critical in trying to achieve an agreed balance sheet. Many of our matters do blow up over financial non-disclosure. So that comes up time and time again. They're the ones that end up in litigation and then end up costing the parties a lot of money. And then thirdly, finding the right family lawyer is critical. So you want to try and find a lawyer who does a lot of mediation work, who isn't fighting the case just for the sake of winning all of the different arguments and points that they possibly can win. The reality is if you want to settle your case at an early stage, both parties are going to have to come to a compromise. You're never going to win every point.

SPEAKER_00 11:02

Absolutely. But coming to that compromise can mean missing out on something, but saving a lot more, otherwise going down the track to court. Correct. Yes. So from my side, we often work with separating couples, unfortunately, to help manage the preparation and sale process in a calm and structured way. How important is it to have the right professionals involved during this time?

SPEAKER_01 11:24

Look, I think this works so well, particularly in high conflict cases that we deal with. There must be agreement by both parties to engage a vendor advocate, or a court can make an order to appoint a vendor advocate. In cases that I have been involved in, having that independent third party who brings that objectivity that the parties may not be able to bring themselves has been really useful in assisting in that wholesale process. And I had one case where we had a whole lot of letters being exchanged in respect of the sale process. And in the end, we were fighting about who was going to remove the fish tank that had live fish in it. And I would hate to think how much money was wasted on legal fees battling out that issue when we could have appointed a vendor advocate to deal with all of that.

SPEAKER_00 12:21

So do you find that having independent guidance around the property side can help reduce the stress or conflict between the parties? Absolutely.

SPEAKER_01 12:29

Having that vendor advocate as that neutral third party definitely helps resolve that stress and conflict that exists between the parties. Now, one of the reasons for that is it should then reduce the number of letters that need to be exchanged between solicitors. As we know, no one likes receiving a letter from a lawyer. So if you can reduce that, that should hopefully reduce the stress and conflict being experienced by the parties. And then another benefit, I think, is that it gives the parties more control over the sale process as opposed to if it has to go through the court, the court is essentially making orders.

SPEAKER_00 13:10

And making the decisions, taking it away from each of the individuals. They lose control, exactly. Binding financial agreements are something people hear about more often now, but there's still a lot of misunderstanding around them. Can you explain what they actually are?

SPEAKER_01 13:24

So binding financial agreements, they're also referred to as BFAs, prenuptial agreements, cohabitation agreement, post-nuptial agreements, they've got all sorts of different names, but the technical name is binding financial agreement. And it is essentially a legally binding contract in which parties set out how their assets are to be divided upon a separation or divorce. And BFAs can deal with property matters or spousal maintenance matters only. And the most important point to take into account is that the BFA does not come into effect unless there is a separation at some point in the future.

SPEAKER_00 14:03

So how can that binding financial agreement help protect the wealth or provide clarity if a relationship does end?

SPEAKER_01 14:10

So there might be a number of instances where it is appropriate to consider entering into a binding financial agreement. The first of those is if the parties want certainty as to what will occur to their assets upon a future potential relationship breakdown. And that means they will avoid having to go to the Federal Circuit and Foundry Court of Australia for property division. Secondly, where one or both parties entering into the relationship have got significant assets which they may want to protect in the event of a relationship breakdown. So examples of that may be if there's an inheritance or significant gifts coming in from family members. There might be loans or other property of significant value that they want to quarantine or protect. Thirdly, where there's intergenerational wealth that the family may want to protect, we're seeing BFAs used more and more in those family situations. That's also important when it comes to the protection of future inheritances.

SPEAKER_00 15:13

So no one goes into a relationship hoping that it's going to fail or planning for it to fail. I guess one of the biggest barriers that people feel uncomfortable is bringing this up at the start of a relationship. How would you suggest that conversation is approached?

SPEAKER_01 15:28

Look, it's always a little bit awkward, I'm not going to lie. And obviously, discussing finances at the beginning of a relationship is certainly not romantic. But I can say to you from experience that having that discussion around finances once the relationship has broken down is even more difficult. So I would encourage everyone entering into a relationship to start those discussions around money, around finance, around spending, and even potentially consider discussing whether it appropriate for your situation to enter into a binding financial agreement. Do you think attitudes around these agreements are changing? Yes, I do. We are seeing a lot more clients coming in for advice around whether a binding financial agreement might be appropriate for their situation. And pleasingly, I'm seeing more and more women who are actually initiating that conversation around BFAs and protecting their wealth.

SPEAKER_00 16:24

So typically in the past it's been more men starting that conversation?

SPEAKER_01 16:27

Yes, in my experience it has been.

SPEAKER_00 16:29

There's often a misconception that putting agreements in place means you're expecting the relationship to fail. But it is, you know, what I can understand, more about creating the clarity and reducing the uncertainty.

SPEAKER_01 16:40

Yeah. So going back to my earlier point, one of the most important things to consider with a BFA is that it will only come into effect upon a separation. So hopefully it sits in your top drawer. It's essentially an insurance policy that will only kick in the future if there's a separation. And obviously, you know, if it needs to be referred to in the event of a separation, it's there.

SPEAKER_00 17:07

At what point should someone seek advice, whether that's around separation or the wealth protection at the start of a relationship?

SPEAKER_01 17:14

So unfortunately, it is all too often the case that I have clients coming to see me once things have blown up and it is too late. And they would have really benefited from receiving that early legal advice. So my tip here is if you are considering a separation or you're entering into some wealth planning, to come in for an initial consultation as soon as you can. As we all know, knowledge is power, and obtaining that advice around your rights and entitlements is going to put you in a much stronger position when you're entering into these various negotiations.

SPEAKER_00 17:56

So being really proactive about it, not just sticking your head in the sand hoping it's going to get better. Correct. Or hoping it's not going to get worse.

SPEAKER_01 18:03

Exactly. And look, the other thing to consider is it does not matter at what stage you see a family lawyer, all of those discussions remain confidential.

SPEAKER_00 18:12

So, Claire, the final question. If there's one thing people could do earlier to better protect themselves, their family and their assets, what would you suggest that be?

SPEAKER_01 18:20

I think you know what I'm going to say is my number one point. Consider entering into a BFA. Secondly, if that is not appropriate, have a discussion around finances, spending money habits, consider potentially entering into some sort of financial plan and ensuring that that is reviewed on a regular basis. And then thirdly, having a discussion around what might happen if you were to separate in the future. What is that going to look like for your family? Who will remain in the family home?

SPEAKER_00 18:54

Who's going to cover what expenses, et cetera? I think this is one of those conversations people often avoid until they're in the middle of a difficult situation. But having the right advice and support can clearly make an enormous difference. And while these discussions can feel uncomfortable at times, they are really about creating clarity, reducing stress, and helping people move forward more confidently if life takes an unexpected turn. We've also put together a simple property separation and wealth protection checklist to help people better understand some of the things they should be considering. We'll include the link in the show notes below. Claire, thank you so much for sharing your insights today. And thank you to you for listening to the Melbourne Property Brief. And don't forget to subscribe so you don't miss the next episode. Thanks for having me.