Property Settlement Agreements in Divorce
Since property is generally the most important asset held by a divorcing couple, it is crucial to ensure that an agreement is reached regarding the division of equity and/or proceeds of matrimonial property.
What is a property settlement agreement in divorce?
A property settlement agreement essentially refers to the part of a financial settlement between two divorcing parties concerning any property which needs to be separated between the ex-spouses following divorce.
In most marriages, the property which needs to be divided just consists of the matrimonial home (ie where husband and wife lived during the marriage), but it can sometimes include second homes and investment property which is either jointly or individually owned.
How do you create a property settlement agreement?
There are several stages to creating a property settlement agreement:
- Negotiation – the divorcing parties must first discuss the options for dividing up any property which forms part of the matrimonial pot. This can either be done informally or through mediation which involves an independent specialist mediator.
- Agreement – once an agreement has been reached, this is generally written down and formalised in a document, with both parties signing it to confirm they agree to the terms. The overall agreement – which is also known as a divorce settlement – will generally include all the other aspects of financial affairs, as well as the property.
- Consent order – in order to ensure the settlement is enforceable, it will need to be turned into a consent order (see below).
If the divorcing parties cannot agree to a financial settlement between themselves or by way of mediation, they may need to go to court so that a judge can decide on a fair divorce settlement.
In this case, the court will assume a 50:50 split to start with and then apply principles of fairness considering the particular circumstances. In particular, the court will consider the welfare of any children under 18, and will look at various other factors set out by section 25 of the Matrimonial Causes Act 1973, eg:
- the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;
- the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
- the standard of living enjoyed by the family before the breakdown of the marriage; and
- the age of each party to the marriage and the duration of the marriage.
The decision of the court will result in a divorce order being created, which will include directions on how any property is to be divided.
Can I use a sample property settlement agreement template or form?
Because each divorce comes with its own individual circumstances, using a template divorce agreement form is normally inadvisable.
Instead, specialist divorce lawyers should be instructed to draft a bespoke settlement agreement, which takes into account the particular situation regarding property and other assets.
We offer a range of financial agreement services to suit your needs and budget without compromising on the service you receive, all of which are drafted by our highly qualified family law solicitors.
What’s the difference between a property settlement agreement and a consent order?
As discussed above, a property settlement agreement forms part of the overall financial settlement. On its own, a financial settlement just outlines the terms of the agreement between the divorcing parties; it is not legally enforceable and does not provide a clean break (although it can be used as evidence in court).
A consent order essentially provides legal standing to the financial settlement, which means that any agreement regarding property and other assets can be enforced in the courts.
A consent order also prevents one party from making financial claims on their former spouse at some point in the future, providing a clean break.
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