In the face of a global pandemic, it is no surprise that things change. While the full impact of the outbreak is uncertain, we are adapting to minimise the impacts on our clients. This week, we turn our attention to how the coronavirus impacts property settlements.
The World Health Organisation has declared COVID-19 (caused by the current “novel coronavirus”) to be a pandemic. This refers to how quickly and widely it has to spread to all corners of the globe.
National and State authorities alike are taking measures to contain the rapidly spreading outbreak and mitigate its economic impact.
Most recently, the Australian Government has committed to implement a $17.6 billion stimulus, aimed at supporting household income and small business support. For more information on the Government’s economic response to COVID-19, read the Treasury’s overview.
Even still, relief on a domestic level is not enough to completely protect our household finances. Australia has a relatively open and trade-exposed economy. Changes in the global economy can have significant implications for our domestic economy and leading economists are forecasting recession.
In these financially uncertain times, it is important to consider how coronavirus impacts property settlements.
The COVID-19 outbreak may affect your ability to comply with Family Court orders. For example, impacted cash flow may make spousal maintenance payments or lump sum payments difficult.
When the Family Court makes orders, all parties need to follow them. Financial hardship or extenuating circumstances (such as the COVID-19 outbreak) do not automatically avoid penalties that can be imposed as a result of breached orders.
If you are unable to follow any Family Court order, you should do the following BEFORE you breach the order:
- seek legal advice as soon as possible; and
- talk to the other party about changing order arrangements if they are no longer practical, but be mindful that any private agreement to deviate from an order does not change the order or your obligations to comply with it.
Valuing the Asset Pool
A critical step in any property settlement, whether it be via private negotiations or Family Court proceedings, is ascribing values to the asset pool. Global economic conditions were improving in late 2019 and Australia’s position was stronger than many other countries.
As the economy has now taken a downward turn, it is important to consider whether professional valuations may have changed since the outbreak. If they have, updated valuations will need to be obtained before a just and equitable settlement can be achieved. Afterall, there is no way that a property settlement can be fair if it is contemplating division of an incorrectly valued asset pool.
The values of most businesses are likely to have been affected in some capacity, including:
- the quarantine and self isolation of employees;
- by supply chain logistics that begin or go through China;
- decreases in consumer confidence and wary household spending; and/or
- by ever evolving travel restrictions and health regulations.
Stock markets have fallen substantially around the world in recent weeks. Your superannuation fund or share portfolio might be geared toward investments in Chinese, Italian or other significantly affected markets.
The decreasing value of assets will no doubt be unsettling. However, shifting values can be a double edged sword. For some, retaining a significantly devalued asset can be beneficial for the overall composition of their property settlement.
If you want to know more about how coronavirus impacts property settlements, seek professional advice straight away. The changing value of assets could affect your entitlements.
Child Support payments
Depending on your means of income and employment circumstances, cash flow may be an issue. If you are finding it difficult to meet your assessed or agreed child support payments, you will need to communicate clearly, and possibly seek legal advice.
For those with a child support assessment, you can ask Services Australia for guidance. They can review the amount of child support paid at any time, especially if your financial circumstances change.
In terms of existing child support agreements, departing from the agreed payment amount is more complicated. It is important to seek legal advice before you default on an agreed payment, as implications will differ depending on the kind of agreement and the circumstances at hand.
In any event, if you are able to speak amicably with the receiving party, advise them that you are experiencing financial hardship during these financially uncertain times and that you intend to reinstate payments once life go back to normal. It is a good idea to demonstrate that you’re trying to make payments as usual and are making sacrifices to this end.
Property settlements that have already concluded
There will be many finalised property settlements where the value of one party’s (or both parties’) retained assets are significantly impacted by the COVID-19. This may cause significant financial hardship, but proceedings have already concluded. So, what now?
Case law indicates it is difficult to set aside a property settlement on the grounds of changing property values. As it stands, external market forces and factors outside the control of either party (such as drought or the Global Financial Crisis) are unlikely to persuade judicial officers to reopen proceedings, even if the change is significant.
Regardless, case law evolves. If this is an avenue that you wish to explore, it is critical to seek legal advice as costs orders can flow from unsuccessful applications.