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Communtity Law Manual | Relationships & break-ups | Making your own agreement to divide your property: “Contracting out”

Dividing your property when you split up (“Relationship property”)

Making your own agreement to divide your property: “Contracting out”

Can a couple contract out of the Property (Relationships) Act?

Property (Relationships) Act 1976, ss 21–21D

A couple can choose to share their property differently than how the Property (Relationships) Act sets out. They can do this by making a contracting out agreement (sometimes known as a “prenuptial” agreement – or “pre-nup”) which says how they want to share the property. Using a contracting out agreement is the only binding way of dividing property if a relationship ends, other than going to court and having court orders made.

When can a contracting out agreement be made?

Property (Relationships) Act 1976, s 21

A contracting out agreement can be made at any time: upon entering a relationship, during it, or at the end of the relationship. Agreements are often used by couples entering a second or subsequent relationship later in life, especially if they already have substantial property which they wish to keep as their own separate property. It is, however, important that an agreement is made before the relationship or marriage/civil union has lasted three years, as entitlements will change at that time.

What requirements must be met for a contracting out agreement to be valid?

Property (Relationships) Act 1976, s 21F

There are important requirements that must be complied with if the agreement is to be valid:

  • the agreement must be in writing and signed by both parties
  • each party must get independent legal advice before signing the agreement. This means that the parties will need to get advice from separate lawyers
  • the signature of each party to the agreement must be witnessed by their lawyer
  • the lawyer who witnesses someone’s signature must certify that, before the person signed the agreement, the lawyer explained to that person the effect and implications of the agreement.

These requirements are designed to protect the people entering into a contracting out agreement, as an agreement has the same effect as a court order and cannot be easily set aside.

Can the court set aside a contracting out agreement?

Property (Relationships) Act 1976, s 21J

The court can only set aside a contracting out agreement if it would result in a “serious injustice”. For example, this might be where an agreement is very one-sided and doesn’t allow one partner to share in property acquired during the relationship.

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