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Binding Financial Agreement vs Consent Orders in Australia

Binding financial agreement vs consent orders | Justice Family Lawyers

Ending a relationship in Australia can be tough, and sorting out the financial side makes it even more difficult. A key question that arises is whether you use a Binding Financial Agreement (BFA) or Consent Orders to formally settle your property division.   

BFAs are private contracts about splitting your assets, while Consent Orders are official court documents. 

Each option has its pros and cons. Let’s take a closer look at how BFAs and Consent Orders work so you can figure out the best option for your situation.

What are the Key Differences Between BFAs and Consent Orders?

The key differences between Binding Financial Agreements (BFAs) and Consent Orders in Australia primarily revolve around their legal standing, the process for their creation and approval, their scope, and their enforceability.

Here’s a detailed comparison based on the most comparable legal aspects:

1. Legal Basis and Creation

  • BFAs: BFAs are private agreements between parties that do not require court approval to be legally binding. They are governed by the Family Law Act 1975 and can be entered into before, during, or after a marriage or de facto relationship.
  • Consent Orders: Consent Orders are agreements that have been approved by the court and thus have the same legal effect as any other court order. They are typically used to formalise the division of property, financial settlements, and parenting arrangements after separation.

2. Court Involvement

  • BFAs: There is no requirement for court involvement in the creation or approval of a BFA. However, both parties need to obtain independent legal advice for the agreement to be valid.
  • Consent Orders: The agreement must be submitted to the court for approval. The court will review the orders to ensure they are just and equitable before making them legally binding.

3. Scope and Flexibility

  • BFAs: They can cover a wide range of financial matters, including property settlement, spousal maintenance, and the division of superannuation. BFAs offer more flexibility as they can be tailored to suit the specific needs of the parties involved.
  • Consent Orders: While they can also cover property settlement, spousal maintenance, and superannuation, the terms must be deemed fair and equitable by the court. This can limit flexibility in some cases.

4. Cost and Complexity

  • BFAs: BFAs can be complex and costly due to the requirement for independent legal advice and the detailed drafting needed to ensure the agreement is watertight.
  • Consent Orders: Consent orders can be less expensive and complex than BFAs, as they can sometimes be drafted and submitted to the court without the direct assistance of a lawyer (though legal advice is still recommended to ensure comprehensive understanding of their terms and to avoid costs and delays caused by mistakes or proposed orders that are not legally sound).

5. Enforceability and Alterations

  • BFAs: Once signed, BFAs are difficult to alter unless both parties agree to the changes or the court deems their use unfair or unpractical. They are enforceable through the court if one party breaches the agreement.
  • Consent Orders: Are enforceable by the court, and failing to comply with them can result in significant penalties. They can be more easily varied or set aside by the court in certain circumstances, such as a significant change in circumstances.

6. Protection Against Future Claims

  • BFAs: Provide a clear mechanism to prevent future claims on property or financial resources by specifying the terms of the financial settlement upfront.
  • Consent Orders: Once made, they provide a legal closure to financial matters between parties, preventing future claims on property settled by the orders.

7. Independent Legal Advice

  • BFAs: It is a legal requirement for both parties to receive independent legal advice before signing a BFA. This is to ensure that both parties fully understand the implications of the agreement.
  • Consent Orders: While obtaining independent legal advice is highly recommended before entering into Consent Orders, it is not a legal requirement for the orders to be valid. However, courts have the discretion to reject proposed consent orders on the grounds that they are unfair or not legally viable.

Choosing between a BFA and Consent Orders depends on the specific needs, circumstances, and preferences of the parties involved. It’s crucial to seek professional legal advice to understand which option is more suitable for your situation.

Which is More Cost-Effective: BFAs or Consent Orders?

The cost-effectiveness of Binding Financial Agreements (BFAs) versus Consent Orders largely depends on the complexity of the agreement, the amount of negotiation required, legal fees, and the specific circumstances of the parties involved.

Here’s a breakdown of the factors affecting the cost of each option:

Binding Financial Agreements (BFAs):

  • Legal Fees: Both parties must obtain independent legal advice for a BFA to be valid, which can significantly increase the overall cost. Each party needs a lawyer to draft, review, and advise on the agreement, which can be complex and detailed.
  • Complexity and Negotiation: The more complex the financial situation and the more assets there are to be divided, the more costly the BFA may become due to the need for detailed drafting and negotiations.
  • Upfront Costs: The upfront costs of drafting and finalising a BFA can be high, especially if the negotiation process is prolonged.

BFAs are generally considered more expensive due to the requirement for independent legal advice for both parties and the potential complexity of the agreements.

Consent Orders:

  • Court Fees: There is a fee for filing Consent Orders with the court, but this fee is generally lower than the combined legal fees associated with drafting and advising on a BFA.
  • Legal Assistance: While seeking legal advice when drafting Consent Orders is advisable, parties can sometimes draft these orders themselves or with minimal legal assistance, especially if their financial situation is straightforward and both parties are in agreement.

Consent Order fees are often considered more cost-effective than BFAs, especially in situations where the financial settlement is straightforward, and the parties are in agreement.

The court’s involvement ensures that the orders are just and equitable, potentially reducing the need for extensive legal negotiations.

Why Might a Couple Choose a Binding Financial Agreement Over Consent Orders?

A couple might choose a Binding Financial Agreement (BFA) over Consent Orders for several reasons, each reflecting their specific circumstances, preferences, and objectives regarding the division of their financial assets and future financial relations.

Here are some key factors that might influence their decision:

1. Privacy and Control

  • Privacy: BFAs are private agreements that do not need to be filed with or approved by a court, offering a higher degree of privacy regarding the terms of the financial settlement.
  • Control: Couples may prefer a BFA because it allows them to maintain control over the agreement’s terms without the court’s intervention, provided the agreement is fair and meets legal requirements.

2. Flexibility

  • Tailored Agreements: BFAs can be highly customised to suit the unique needs and circumstances of the couple, including complex financial arrangements, business interests, and international assets.
  • Future Financial Arrangements: BFAs can include terms for future financial arrangements, such as spousal maintenance, which can be particularly important if the parties seek to establish clear, ongoing financial obligations.

3. Avoiding Court Processes

  • Avoiding Uncertainty and Delays: By opting for a BFA, couples can avoid the uncertainty and potential delays associated with court processes. This is because BFAs do not require judicial approval to become binding.

4. Protection Against Future Claims

  • Finality: A well-drafted BFA can provide a clear and final settlement of financial matters, potentially offering stronger protection against future claims on each other’s assets, under certain conditions.
  • Certainty: Couples may value the certainty that a BFA provides, knowing exactly what their financial rights and obligations are without the possibility of future court-imposed alterations (unless under exceptional circumstances).

5. Spousal Maintenance Agreements

BFAs can include specific provisions for spousal maintenance, including waivers or agreed amounts, which can be more difficult to achieve with the same level of specificity and permanence through Consent Orders.

6. Preemptive Measures

Couples might choose BFAs as a form of preemptive measure before getting married or living together (pre-nuptial or pre-cohabitation agreements), outlining how assets will be divided in the event of a separation, which can provide peace of mind and clarity from the outset.

Choosing a BFA over Consent Orders is a significant decision that should be made after careful consideration and consultation with legal professionals. Each couple’s situation is unique, and the choice will depend on their specific needs, priorities, and the complexity of their financial affairs.

Binding Financial Agreement vs Consent Orders: Which is Better for You?

Let Justice Family Lawyers guide you through the complexities to secure your financial future. Contact us today for expert advice tailored to your unique situation. Your peace of mind starts here.

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