DIVORCE – FAMILY LAW 101 THINGS YOU SHOULD KNOW
Every Real Estate Agent that has ever walked the earth will no doubt at one stage or another be approached by either an individual or a couple with a request to sell a property as a consequence of a break down in a marriage or a de facto relationship. Whilst in a macro sense, the sale exercise is really no different from what must occur for an intact couple, the overlaying fact that the parties are separated/separating can potentially throw up some curly situations that will potentially drag the Agent into conflict and controversy on many levels. Below is a dot point summary of things that any Agent being asked to sell a property on behalf of a separating couple should know:
• Is there any extra layer of documentation that should normally be prepared between the spouses beyond the normal Property Occupations Act 2014 Form 6 Listing Agreement? – Yes typically a Consent Order or a special Family Law Agreement (known as a BFA) is signed up between the parties which contain a series of clauses known as “machinery provisions”. As the name suggests, these clauses set up a series of default automatic consequences that will bind the parties if they cannot agree on issues such as:
– Which Agent should list the property;
– What list price should be on the property and/or periodic reductions in that price;
– The timing and arrangements for the property to go to auction;
– Who is to pay the Real Estate Agent’s costs and/or costs of an Auctioneer; and
– Who is responsible for meeting mortgage repayments, rates, insurances and general maintenance and upkeep for the property?
• Is the Agent entitled and/or obligated to view the Consent Order or BFA as part of receiving instructions for the sale? – These documents are not confidential between the parties (the separating couple) and so there is no issue with an Agent viewing them. As the Agent however is not personally bound to ensure that the parties continue to act in compliance with their Order/BFA, there is no obligation on an Agent to view the documents and it would not be common for the parties to share that information with the Agent.
• What happens if the property is registered in the name of only one of the spouses? Is there any obligation on the Agent to make sure the sale is happening with the other spouse’s full knowledge and consent? – An Agent does not have any direct obligations under the Family Law Act to protect the interests of the other spouse whose name is not on title. There are however, a great deal of responsibilities which sit on the shoulders of the single title holding (the selling) spouse as regards to the other spouse and these include:
– Disclosure – the spouse must keep the other spouse informed about the intention to sell the property and offers which are coming in; and
– Ensuring that the property is sold at market value.
AND it is very important to note that under Section 112AB of the Family Law Act, a third party (like a Real Estate Agent) can actually be fined or even imprisoned if that third party “aided or abetted” a contravention of a Court Order by a person who is bound to it. Consequently, if an Agent is aware that there is a Court Order that requires the selling spouse to undertake certain things, the Agent should not under any circumstances accept and/or follow instructions from the selling spouse to do anything which is in clear contravention of that spouse’s obligations under the Orders.
• If one spouse alone is the title holder and is selling the property, is the Agent entitled to voluntarily inform the other spouse about what is going on with the sale if they happen to enquire? – Strictly speaking, the Agent is duty bound to keep all information concerning the sale confidential between themselves and the client who has engaged them, being the single title holder spouse. The Agent therefore is not in any way automatically authorised at law to disclose information to the other spouse if enquiries are made and should therefore first seek authority/permission from the client spouse before any information is released. If the selling spouse withholds consent to share information with the non-selling/enquiring spouse, then the Agent would be well advised to respect the “gag” and direct the non-selling spouse to take the matter up with their Solicitor and/or the Family Court where arrangements can be made to either talk the selling spouse into compliance or otherwise obtain Court Orders forcing that compliance.
• Can the other spouse caveat or interrupt the sale? – A caveat is an express stop order which once registered against the property, has the effect of preventing any further documents being registered until the caveat is withdrawn, lapses or is removed by Court Order. Caveats are particularly menacing because they can be registered within a few hours at the cost of only a few hundred dollars however, if they have to be removed involuntarily, the process can take weeks or even months and can cost many thousands of dollars. They can be particularly problematical in situations where the caveat comes onto the property at a time after a binding contract for the sale of the property has been signed, but that contract has not yet been settled. As for whether a spouse actually has the right to lodge a caveat? The rule here is technical and often misunderstood. Put simply if the spouse cannot prove that they had personally invested substantial amounts of money into the property, they have no right to caveat it. But unfortunately that rule is bent/broken all the time.
• If the property is in joint names, what happens if one spouse is willing to accept an offer from an interested Buyer, but the other spouse is refusing to co-sign? – There are a number of options here which may be available:
– If the property is being sold under a fully regulated set of “machinery provisions”, depending on how those provisions were drafted, there may actually be a positive obligation on both spouses to accept an offer which comes in at or above what was already a pre-set list price. If one spouse therefore is breaching those machinery provisions, they are potentially liable to sanction, which is usually a fine that can be imposed by a Family Court to punish a person for breaching a Court Order. Reminding the reluctant spouse of those consequences, therefore sometimes will achieve compliance.
– There is an ability to rush an application back to the Family Court to seek Court sanction for the sale. Those applications however, usually take at least 2 – 5 weeks before they could be placed before a Judge, can cost several thousands of dollars to run and normally would require some fairly good evidence of the property having already been exhaustively marketed or that the intended contract price is well above the value of the property with good strong independent market valuation evidence to back that claim up.
– Under standard Family Law principles, if one spouse acts or fails to act in a way that results in assets being devalued or lost, then the innocent spouse can make claim (called Kowaliw arguments) for compensation for the other spouse to make good on the innocent spouse’s share of the loss. Depending upon the circumstances, these threats again can be quite effective in bringing the reluctant spouse back to sign the contract however, the point sometimes provokes the counter-argument – “so does this mean that if we say no to this deal and then we do achieve a higher price by putting the property back to the market, I get to keep the extra money?”
– In some circumstances, the inability to reach agreement on the sale may invoke pre-set default arrangements which enables one or either of the parties to put the property immediately to auction at a reserve price set to the same number as the rejected offer. By this arrangement the interested purchaser can then go to the auction with the ability to secure the property for the same price if no one else bids a higher price.
Ultimately, none of these solutions are an immediate “easy fix” and in many circumstances, the resolution of the issue eventually becomes a bit of a “staring competition” between the spouses to see who is prepared to capitulate first. Thankfully though, in most circumstances, a combination of common sense and/or nature finding its way, results in a sale eventually being concluded albeit perhaps not as clean and easy as it might have been had there been more co-operation and trust.
• Is there any circumstances in which the Real Estate Agent’s conduct in the sale of the property, file notes and financial transactions can be accessed? – Yes, if something went on in the sale that is relevant to the dispute between the spouses, the Real Estate Agent’s records and even the Real Estate personally can be subpoenaed and required to come before the Court to provide answers and information to anything that might be relevant to the particular issues/complaint. Importantly though, Family Court Judges have no power to regulate or punish an Agent who might be accused of having acted unprofessionally and therefore generally, the consequences of any particular problem/allegation of foul play do not stick with the Agent, but instead flow to the spouse who had instructed the Agent. As mentioned earlier in this series however, if in the sale of a property, a spouse deliberately breaches a Court Order that required certain things to be done or not done and an Agent knowingly assists the spouse in carrying out that breach, the Agent will themselves become liable to punishment from the Court pursuant to Section 112AB of the Family Law Act.
• What happens if one spouse is attempting to sign documents under a power of attorney they claim to hold on behalf of the other spouse? – The act of separation between spouses does not have the effect of automatically revoking a Power of Attorney that might have previously been given by one spouse to the other during happier times. If a formal Divorce Order has issued and/or one of the spouses has remarried, or if the relevant spouse prepares, signs and delivers a Notice of Revocation of the earlier Power of Attorney, or prepares a new Power of Attorney which is inconsistent with the old one, then any of these actions will have the effect of revoking the old Power of Attorney and consequently, any attempt to use a Power of Attorney after any of these events will be invalid. At the risk of stating the obvious however, any Agent should proceed with extreme caution in accepting any documentation signed on behalf of a Power of Attorney by one of the separating spouses purportedly on behalf of the other.
• What are Section 106A Orders and/or Orders for the appointment of trustees for sale? – Although it very rarely happens, there is actually a standard Order which is typically agreed to between spouses when they sign up for their final property settlement deals which gives to the Registrar of the Family Court the power to sign documents on behalf of one of the spouses if that spouse defaults in carrying out all of the tasks necessary to complete the sale of an asset. Under this Section therefore, one spouse could theoretically have the Registrar of the Family Court sign a Contract and the transfer of title documents which would be necessary to effect the sale of the property. In each case, there must be a fresh application made to the Court in which the Court must be satisfied that there was a clear obligation under the Order for the defaulting spouse to sign the document and there has been ample opportunity for that spouse to sign the document voluntarily. On a related topic, when one spouse has proven to be consistently delinquent in voluntarily co-operating in the process of a sale of an asset, there is also scope under the Family Law Act for a Judge to appoint the other spouse as “sole trustee for sale” of the assets. When an Order of this type is made, the one spouse is then given complete authority to choose the Agent, the method for listing, sign contracts and transfer documents and basically do every single one of the acts necessary to carry out the full sale of the asset and by virtue of this Order, that one spouse may sign all of the documents on behalf of each of them. Like Section 106A Orders however, the situations where this ever actually occurs are very extreme and therefore very rare. If however a sale as appointed trustee is to occur, it is imperative that the Court Order that authorises this be registered on the Title for the property, otherwise the Queensland Office of the Department of Natural Resources will not recognise the single spouse signature on the transfer documents.
Michael Zande is the Principal of Zande Law Solicitors, with 25 years experience in practice. Michael and his team have had extensive experience in conveyancing matters. Please feel free to review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.