By Helen Tyree, Director, and Ella Buchanan, Law Clerk, McWilliam Tyree Lawyers

The Relationship (Property) Act 1976 (“the PRA”) determines how a couple’s property is to be divided in the event the relationship ends. Very broadly, once a couple has been in a de facto relationship for over three years, all property defined as relationship property will be divided equally. Even couples who have been together for less than three years can be subject to the terms of the Act in certain circumstances.

However, some couples do not want the terms of the PRA to apply to their relationship, and wish to protect their individual property interests and specify how their property is to be divided in the event of a separation. The PRA allows for this be providing that couple can “contract out” of the Act. This is done by completing a Contracting Out Agreement (“COA”). This will generally be completed within the first three years of the relationship (before the scheme of the PRA is applicable), but can be done at any time during the relationship.

There are certain legal requirements that the agreement must meet to be a valid COA under the Act.

What can a Contracting Out Agreement do?

Contracting Out Agreements most commonly:

  1. Specify whether specific items of property are relationship property or the separate property of one of the parties to the agreement;
  2. Specify how (if ever) one party can gain an interest in the specific property of the other;
  3. Specify whether property purchased in the future will be separate or future property;
  4. Specify how any relationship property will be divided in the event of a separation;
  5. Specify how property will be divided in the event of the relationship ending with the death of one of the parties.

A COA will be tailored to the specific needs of the parties to the agreement.

Requirements for a valid agreement

In order to be binding, there are some legal requirements that must be complied with by both parties first:

  1. The agreement must be in writing and signed by both parties, and witnessed by their respective lawyers.
  2. Each party must get independent legal advice prior to signing, from different lawyers.
  3. Each witnessing lawyer must certify that they have explained the implications of the agreement, before it is signed.

Preparing to see a lawyer about a COA

As can be seen from above you must have had legal advice to have a valid agreement. It is important that you obtain that advice prior to the relationship being more than three years long (especially if you are the person with property to protect). If you wait until the relationship is over three years then your partner’s rights will have already crystallised, meaning there is little reason for them to sign an agreement.

Providing the legal advice above on a COA requires us to do more than read through the agreement with you. In order to be able to certify that we have explained the implications of the agreement to you, we need to have a complete understanding of your financial circumstances, assets and liabilities and those of your partner. We need to be able to explain to you your entitlements under the PRA, how the PRA would apply to your situation and how the agreement departs from those entitlements. We also need to be sure that you understand the agreement fully. This includes being aware of the values of any relevant property.

Therefore, the best way to prepare for an appointment with a lawyer about a COA is to come with a full list of all of your property, values thereof, and supporting documentation (such as bank statements and property valuations, if you have them). We will discuss this information with you, and the proposed terms of the COA at the first appointment.

All of the lawyers at McWilliam Tyree are able to assist with a completion of a Contracting Out Agreement.