Family Law - Cohabitation Agreement Pursuant To Section 285 Of The Property Law Act 1958 (vic.)

By: Michael Pickering - LAC Lawyers
Partners and spouses will be aware of the 3 types of financial agreements under the Family Law Act (Cth.). These financial agreements are as follows:

- Pre-Nuptial Agreements (Section 90B)
- Post-Nuptial Agreements (Section 90C)
- Post-Divorce Agreements (Section 90D)

Post-Nuptial Agreements are commonly used to formalize property settlements after a breakdown of marriage, as an alternative to Family Court consent orders and to make a binding provision in relation to spousal maintenance.

Post-Divorce Agreements, on the other hand, are not as common. This is an agreement made after the parties have divorced. Such agreements deal with property acquired up until the time of divorce.

Whilst Victoria, along with other State Parliaments, save for Western Australia, have agreed to refer their powers over defacto and same-sex property matters to the Federal Government, Victorian courts still exercise power over cohabitation agreements entered into between two partners who intend to live together. This power is exercised in Victoria under Section 285 of the Property Law Act 1958 (Vic.). This section gives Victorian courts the authority to adjust the interest of domestic partners in property which either or both may own in terms that appear just and equitable having regard to a number of factors such as:

- Financial and non-financial contributions made directly or indirectly by the domestic partners to acquiring or improving any property; and

- Contributions made by either of the domestic partners as to the welfare of the other domestic partner or to the welfare of the family including any children.

Increasingly, partners considering cohabitation (as opposed to formal marriage), and either have no children from previous relationships or who do not wish to have any children from the current relationship, are entering into cohabitation agreements pursuant to the Victorian Property Law Act 1958.

The primary purpose of such a cohabitation agreement is to protect the assets of each party in the future. The agreement provides that should the relationship end, each party will leave the relationship with those assets which he or she brought into the relationship. Only jointly acquired assets fall into the asset pool for distribution by Victorian courts pursuant to the powers provided by Section 285.

Cohabitation agreements under the Property Law Act 1958 are often sought by partners to relationships who own substantial assets and who wish to preserve those assets if the relationship ends unexpectedly quickly.

These cohabitation agreements are not as formal as their counterparts under the Family Law Act. The State cohabitation agreements, however, can be just as influential. They should be treated by the domestic partners (and by their respective legal advisors) as serious documents.

State courts are more likely to uphold cohabitation agreements pursuant to statutes like the Property Law Act 1958 than are either the Family Court or the Federal Magistrates' Court when requested to uphold the three types of financial agreement possible under the Family Law Act. This is primarily due to the fact that financial agreements under the Family Law Act will often need to make provision for spousal maintenance in the context of a marriage which may have lasted for many years and also make financial provision for the education, welfare and support of children under the age of 18.

Clients should be advised, however, that agreements under Section 285 of the Property Law Act are not definitive. Such cohabitation agreements will not necessarily finally determine the distribution of assets in the event of a relationship breakdown. However, the cohabitation agreements may be taken into account by Victorian courts in their determination of what is a just and equitable resolution of the distribution of property when the domestic relationship has ended.

Clients should be advised that the longer a domestic relationship lasts, the less likely it will be that Victorian courts will enforce a cohabitation agreement which was drafted, for instance, many years previously when the domestic relationship was only just commencing in circumstances where one partner has been the effective homemaker, or where, contrary to initial plans, the partners did decide to have children. In those circumstances, clients would be best advised to enter into a pre-nuptial agreement under Section 90B of the Family Law Act or, at the very least, enter into an updated cohabitation agreement under Section 285 of the Property Law Act 1958 (Vic.).

Clients must also understand that any type of pre-nuptial agreement (whether under the Family Law Act or the Property Law Act) are subject to the normal contractual rules of enforceability. In other words, if the agreements have been entered into by virtue of duress, undue influence, fraud, or mistake, no court will enforce the agreement and property will be divided in accordance with relevant legislation.

Clients should also be aware that financial agreements under the Family Law Act and cohabitation agreements under the Property Law Act should be accompanied by effective estate planning. At a minimum, clients are best advised to effect wills when entering into pre-nuptial agreements to ensure that their individual property is divided in accordance with their specific wishes rather than in accordance with the statutory formula set out in the Administration and Probate Act 1958 (Vic.).

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Michael Pickering is a solicitor employed at LAC Family Lawyers Melbourne. He has nearly 20 years experience as a lawyer.