Could your friend with benefits become a financial liability?

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Could your friend with benefits become a financial liability?

Author: Carol Pages, Pages Family Law.

What happens if what you thought was a casual relationship breaks down, and the next thing you’re in the family courts with a claim against your major assets such as your house? Maybe you weren’t even living together and you didn’t think you needed a Financial Agreement – the Australian version of a ‘pre-nup’? What can you do before the costs add up?

When can an ex make a claim?

A claim can be made for a division of property or share of assets including your house and superannuation. Claims can also be made for spousal maintenance.

There is a time limit of two years from the end of the de facto relationship, however exceptions can be made if hardship would be caused if permission to make the application out of time is not granted.

Could this happen to me?

This article is focussed on giving some tips for those who are in a current or recently broken down casual relationship. If you are in a de facto relationship, some of the information may also be helpful to you.

What is a de facto relationship?

A de facto relationship is a relationship as a couple living together on a genuine domestic basis. The law sets out factors that make up the legal test to indicate whether the parties are legally in a de facto relationship.

Examples of these indicators that may be relevant to casual relationships are:

– Length of the relationship – that includes all periods of the relationship if it has been an ‘on and off’ relationship –at least two years.

– Nature and extent of common residence – this doesn’t necessarily mean you need to live together. What were your living arrangements? What did a normal week look like for you? Maybe you had separate houses, but spend several nights a week at each other’s places. Did you have keys to each other’s house?

– Whether a sexual relationship exists.

– The degree of financial dependence or interdependence and arrangements for financial support between you – Did you pay bills for the other party? Did they pay bills or provide financial support to you?

– The reputation and public aspects of your relationship – do you attend family events such as weddings together? Would you attend each other’s work functions such as your Christmas party together? Would you socialise with friends and be considered a couple publicly?

Other findings relevant to whether a de facto relationship exists relate to ownership and acquisition of property; commitment to a shared life together; care of children and whether the relationship is registered under a prescribed state law.

The Court in determining whether a de facto relationship exists will consider and weigh up the relevant factors above.

What can you do if you receive a claim?

If a claim is going to be made in Court, there are requirements that some steps are followed first such as writing a letter setting out what the claim is.

Claims can be made when there is not enough money to go around, and it might mean that the only major asset is one party’s house. It can be tempting to ignore letters and hope it goes away. In some cases we’ve had the initial letter was sent and after no response clients have received Court documents. Once the Court documents are filed the matter will go ahead and orders can be made in your absence.

Get good advice with someone who is specialised in family law and has the experience to advise you about this. It’s not recommended to go this alone, or try and reason with your ex or argue about it, which can sometimes make it worse.

Advice will help you know whether there is a claim. Family law has a lot of misconceptions out there. Even though clients say ‘we never lived together’ or ‘it was only a casual thing’ it may be when the legal factors are considered that there is some risk.

If it is a try on by your ex, your lawyer won’t be long in telling you! We’ve put a quick end to some opportunistic attempts before!

If the claim has some merit, or it is arguable, your advice will give you some peace of mind to know where you stand and what your options for next steps could be. For example:

If there is a claim or a chance of a claim – what are the costs vs benefits of going further? How much is it going to cost you in legal fees? What can you expect to pay/receive in a settlement? The other side have that decision to make too – if you’ve received a letter they’ve already had legal advice and incurred costs with a lawyer.

Your lawyer will advise you of legal and commercial options for next steps tailored to your matter to help you to resolve your matter and to try and conserve your costs.

If you are in a relationship – can you protect yourself?

If you are in a relationship the best way is to get advice on whether a financial agreement is right for you. These can be done before, during or after a de facto relationship.

My relationship is casual, and I don’t need a financial agreement – what can I do?

Remember that whether a de facto relationship exists legally is going to depend on an assessment of the relevant legal factors. If you are sure this is not you, some of the things that would be good evidence against a claim include – not paying day to day bills for each other, keeping financial matters separate, not being each other’s plus one at events, not getting into the habit of spending most nights at each other’s places and so on.

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