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The Necessity of Formality
The Need for Independent Legal Advice
Pursuant to the Property (Relationships) Act 1976 (“the Act”), it is possible for spouses/partners to contract out of the Act and provide their own rules for how their property will be divided in the event of a separation.
For such agreements to binding the following must be complied with:
- The agreement must be in writing and signed by both parties.
- Each party to the agreement must receive independent legal advice before signing the agreement.
- The signature of each party must be witnessed by a lawyer.
- The lawyer who witnesses the signature of the party must certify that before the parties signed the agreement, the lawyer explained to the party the “effect and implications” of the agreement.
It is the requirement for independent legal advice that is considered in this article.
The legislation is clear, the lawyer who witnesses the signature must explain the “effect and implications” of the agreement. It is this advice that comprises the independent legal advice. However, the Family Court has held that an explanation of the “effects and implications” of the agreement means more than simply explaining the meaning of the words on the page.
The Court has held that what is required is an explanation of that parties’ potential claim under the legislation in the event of a separation and how that potential claim is either enhanced or compromised by the agreement being reached. In order to give that advice, the lawyer witnessing the signature must obtain a full understanding of the parties’ circumstances, assets and debts.
Consequences / Risk
The importance of obtaining adequate advice cannot be overstated. If one party to the agreement fails to obtain adequate advice the agreement is susceptible to being set aside. In the event of this happening, the property would fall to be divided according to the provisions of the Act with the consequence that the party who sought to protect assets may find that those assets are now subject to the regime of equal sharing of all relationship property.
The cost of obtaining independent legal advice varies according to the complexity of the agreement and the property involved. However, it is possibly a small price to pay when compared to the consequences of not receiving adequate advice.