Relationship Property Agreements and Settlement Mechanics: What We Are Seeing and Why It Matters

This article is general information only. It is not legal advice. Every relationship property matter turns on its own facts, and independent advice should be obtained.

Most relationship property matters resolve by agreement. That is a positive reflection of the way parties and their advisers work towards pragmatic outcomes and, often, avoid the cost and stress of litigation.

In practice, however, a settlement is not complete simply because agreement has been reached. Increasingly, we are seeing relationship property agreements that are sound in principle, but which encounter difficulty at the point of implementation because the property, lending, trust, or company mechanics have not been fully worked through.

This article is the first in a short series. It reflects recurring issues we are seeing in agreements coming across our desk, particularly where settlements involve real property, borrowing, or asset‑holding structures. The aim is not to criticise drafting or approach. Relationship property law is complex, and many of these issues arise at the intersection of disciplines. The aim is to highlight practical risks that can leave clients exposed or force unnecessary court involvement after the parties believe matters have been resolved.

The gap between agreement and implementation

Relationship property agreements usually focus on entitlements. Who retains which assets. What adjustment sum is payable. How trusts or companies are to be dealt with.

Implementation is different. It is transactional. It requires a series of steps that must be achievable in practice and acceptable to third parties such as lenders. It also requires careful sequencing so that no party is exposed during the transition, particularly where rights are being relinquished or structures altered before settlement funds are received.

Where that gap between agreement and implementation is not properly bridged, difficulties tend to emerge late, often at a time when parties are least able or willing to renegotiate.

Recurring issues we are seeing

The following themes arise repeatedly in relationship property settlements involving property, lending, trusts, or companies. Each will be explored in more detail in follow‑up articles.

Mortgage versus loan distinctions and classification issues

We are seeing misunderstandings about the role mortgages and lending play in determining whether property is separate or relationship property under the Property (Relationships) Act.

A loan is the debt. A mortgage is security. The registration of a mortgage over a property does not, of itself, change the character of that property or mean that loan funds were applied to it.

This distinction is particularly important where separate property, such as an inherited asset, is offered as security for borrowing used for relationship purposes. In those circumstances, the separate property may be exposed to risk, but that exposure does not automatically convert the asset into relationship property.

Where this distinction is misunderstood, it can distort the relationship property analysis from the outset and then drive settlement negotiations and outcomes based on incorrect assumptions. That, in turn, creates pressure, imbalance, and unnecessary difficulty at settlement.

Refinancing assumptions that are not lender tested

Many settlements assume one party will refinance and pay an adjustment sum. That may reflect intention, but it is not a plan unless it is supported by realistic timeframes, lender requirements, and a fallback position if finance is not approved.

Changes in income, serviceability, and risk profile following separation mean refinancing is often more complex than anticipated. Agreements that do not address this risk can leave both parties stuck and exposed.

Trusts and companies treated as neutral structures

Trusts and companies do not unwind simply because parties separate. Governance, control, guarantees, and lending arrangements often continue unless deliberately addressed.

We regularly see agreements that deal with trust or company interests at a high level without fully addressing the practical steps required to achieve a clean separation of risk, particularly where one party is retaining the structure.

Rights and leverage surrendered before settlement occurs

One of the most concerning patterns we see is where a party is required to resign, release, or give up rights before receiving their settlement entitlement.

This arises most often in trust or company contexts, where a party may be removed as a trustee, beneficiary, director, or appointor before payment is made. Once those rights are relinquished, the exiting party may lose visibility and leverage, leaving enforcement through the courts as the only remedy if settlement does not occur as agreed.

Indemnities relied on where releases are required

Indemnities between parties are common, but they do not bind lenders or other third parties. A party who remains a borrower or guarantor remains exposed, regardless of what has been agreed between the separating parties.

Agreements that rely on indemnities alone can leave clients believing they are financially separate when they are not.

Lack of security for deferred or conditional payments

Where adjustment sums are deferred or contingent, the party owed money can effectively become an unsecured creditor unless the agreement provides appropriate protection. In a commercial context, security would usually be expected. In relationship property settlements, this risk is sometimes underestimated.

Unclear or impractical sequencing

Even where parties agree on outcomes, risk often arises from a lack of clarity about sequencing. Who transfers first. When funds are paid. What happens if settlement cannot occur on a single day. Who bears risk during the transition.

Sequencing is not administrative. It is often central to whether clients are protected.

Why these issues matter for clients

For clients, these issues are not technical. They affect whether settlement proceeds smoothly, whether funds are received on time, and whether financial separation is genuinely achieved.

Where mechanics are not robust, we often see delays, increased costs, renewed conflict, and applications to court to enforce agreements that were meant to bring matters to an end.

This is about interdisciplinary risk, not blame

These issues do not reflect a lack of care or competence. They arise where relationship property principles intersect with property law, lending, trust, and company considerations. The most durable outcomes tend to be those where entitlements and implementation are addressed together, with sufficient attention to how settlement will actually occur.

What this series will cover next

In the articles that follow, we will look more closely at:

1. Mortgage versus loan, and why the distinction matters in relationship property classification
2. Refinancing assumptions and realistic fallback pathways
3. Trusts, companies, and the risk of surrendering rights before payment
4. Indemnities versus actual releases from lenders
5. Sequencing settlement steps to protect parties throughout implementation

The aim is practical. To ensure that relationship property agreements are not only fair in principle, but workable in practice.