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In Short
- Consent Orders are court-approved agreements that formalise property settlements after separation and must be fair and reasonable.
- Binding Financial Agreements (BFAs) are private contracts that divide property without court approval but require strict legal steps to be valid.
- Both options legally record how assets and finances are divided after separation or divorce.
Tips for Businesses
If separation affects business assets, property or finances, choose the option that best protects your interests. Use Consent Orders where court oversight and fairness matter. Use BFAs for privacy and flexibility, but only with proper legal advice. Always consider future enforcement, costs and how the agreement could affect business ownership and financial security.
Summary
This article is an explanation for Australian business owners and individuals on Consent Orders and Binding Financial Agreements under Australian family law. It explains the legal differences between court-approved property settlements and private financial agreements, prepared by LegalVision, a commercial law firm that specialises in advising clients on disputes and litigation.
When you separate from your partner, the process of dividing and allocating assets can be complicated and stressful. When looking to legally document these divisions, two options you can consider are:
- a Consent Order; or
- a Binding Financial Agreement (BFA).
Both documents reflect an agreement made between you and your partner on how you will handle your property in the event of separation or divorce. This article will set out what both a Consent Order and BFA entail and the main differences between the two.
What is a Consent Order?
A Consent Order is a court-approved agreement that formalises the property settlement between separating parties. Once you and your partner reach an agreement, you apply to the Family Court to have your arrangements converted into legally binding court orders.
The court reviews your agreement to ensure it is just and equitable before making it enforceable.
What is a Binding Financial Agreement (BFA)?
A BFA is a private contract between you and your partner that outlines how:
- property;
- assets; and
- financial responsibilities will be divided.
Unlike Consent Orders, BFAs do not require court approval and operate as contractual arrangements between the parties. However, they must meet strict legal requirements to be valid and enforceable.
You should seek legal assistance if you are considering entering into a BFA, as you need to demonstrate that each party has received independent legal advice for the BFA to be valid and enforceable. There are also other requirements, and a lawyer can assist you in navigating the complex requirements so that your BFA is not void.
Key Differences
Court Involvement
Consent Orders require court approval and become formal court orders once approved by a judge. In contrast, binding financial agreements are private contracts between the parties that do not require court involvement or approval.
As a result, Consent Orders have the same legal force as any court order and are enforced by the court. You do not necessarily need legal advice to draft Consent Orders for them to be enforceable.
However, it is strongly recommended that you obtain it. Adversely, a BFA is only enforceable where both of you have received independent legal advice. If a BFA is prepared without this independent legal advice, the BFA is void and unenforceable. A Certificate of Independent Legal Advice is required to be prepared and signed to show that both of you have received independent legal advice.
If one of the parties breaches the BFA, you may need to initiate court proceedings to enforce it.
Creation of Documents
Consent Orders can only be made after separation has occurred. However, BFAs can be entered into before marriage, during the relationship or after separation. These are sometimes referred to as a 'pre-nup' or a h3post-nup'.
Is It Fair and Reasonable?
A court will only make orders on your Consent Orders if they think that what you have agreed on is fair and reasonable to both parties.
A BFA may not be fair to both of you, and it is possible that you or your partner may have a more advantageous settlement. However, they may allow for more flexible arrangements, which may suit your circumstances. This is all the more reason why it is important to receive independent legal advice when you are considering entering into a BFA.
A lawyer may also prepare a Letter of Advantage/Disadvantage when they review a BFA so that their client is aware of the effect of the BFA.
Cost Considerations
BFAs typically involve lower initial costs, as they avoid court filing fees and processes. In contrast, consent orders involve:
- court application fees;
- legal representation fees; and
- the costs of the formal court approval process.
Key Takeaways
Even though you are not required to have legal advice to make a Consent Order enforceable, it is highly recommended. You do not want to go to the effort of writing a document that will not be accepted by the court because the agreed-upon terms were not fair and reasonable to both parties. Not only that, but a lawyer will make sure the document adequately reflects the agreement you have reached with your partner. A lawyer can also assist you in providing for any future issues relating to interpreting or enforcing the document.
If you want to enter into a BFA, you will need to get independent legal advice in order for it to be valid and enforceable. Ultimately, whether you choose to obtain Consent Orders or a BFA, you should consider the differences and ascertain which is more preferable for your circumstances, as well as consult legal advice on the specific requirements you may need.
LegalVision cannot provide legal assistance with this topic. We recommend you contact your local law society.
However, if you have any other issues regarding disputes and litigation, LegalVision can assist in those matters. LegalVision provides ongoing legal support for Australian businesses through our fixed-fee legal membership. Our experienced lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision's legal membership, call 1800 532 904 or visit our membership page.
Frequently asked questions
Do I need a lawyer to prepare a Consent Order or Binding Financial Agreement?
You and your partner can prepare Consent Orders by yourselves. You do not necessarily need a lawyer, but it is recommended to seek legal advice. However, if you decide to use an BFA, both of you will need to get independent legal advice for it to be enforceable.
What happens if my agreement is not fair to both parties?
A court will only make orders on your Consent Orders if they think that what you have agreed on is fair and reasonable to both parties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
