The
headlines have been that prenups will become binding with Law Commissions (LC) qualifying
nuptial agreement (QNA) however the reality behind the headlines is not so
clear cut.
It
has taken the LC 5 years to release the full report on marital property
agreements. Expectation was high that this report would say the pre and post
nups should be put into statute, and that ‘needs’ (maintenance) and the status of non-marital
property would be clarified.
These
criteria must be met in order to create a QNA;
·
Will be able to make arrangements for
property but not financial needs.
·
Must be a deed and a valid contract.
·
Parties must understand that it will
partially remove courts discretion.
·
Must not have been made within 28 days
of marriage/civil.
·
Full disclosure of financial situation
·
Legal advice by a qualified lawyer
Working
out financial needs is a big problem for the courts and one which makes the
current acceptance of prenups difficult as the court must have discretion to
make sure that if there are children then they will be provided for. The LC has
managed to not clarify the area of financial needs at all. The final report
says that they think there should be guidance, especially with a lack legal aid
for divorcing couples as there will be a rise in those representing themselves.
However, how this guidance would be written or what it would consist of has not
been made clear by the LC. The LC merely thinks guidance would be helpful,
describing a number of different formats that could be used and different
jurisdictions that have different types of guidance. They say that they want to
leave the framework as it is but surely this is an area the LC should have come
up with some clear answers. Instead the draft bill gives courts discretion to
not take into account the details of the QNA in relation to needs. This lack of
clarity is very disappointing, it is understandable that it is a difficult area
to tackle but surely 5 years of re3seaRCH should have lead to a better
conclusion than this.
Non
marital property is also an area where the LC has decided to not make any
recommendations. The reason being that they would have liked to have had
certain provisions put into statute but they believe parties should be free to
make contractual arrangements between themselves. This fine but what happens if
there is not enough money in the pot to meet the needs of the parties. The
courts are surely not going to leave one party with a large amount of wealth
while the other has to go on to benefits regardless of a qualifying prenuptial
agreement. The answer to that is no they won’t, because the LC draft bill says
that the court cannot exercise powers in a way that is inconsistent with the
QNA unless it is to; meet the needs of either partner or in the
interests of a child of the family. This essentially means that yes QNA does
allow parties to keep certain things separate but the court still has the same
discretion to ignore the QNA for financial needs. This is no different to the
current situation. Would a court use non
marital property that has been specifically written into a QNA to not go to one
party as a means to provide for the needs of a child of the family or the
weaker party? The discretion is there for the court to do so if it wishes which
makes the QNA a bit pointless.
There
are many unanswered questions that the draft bill and the LCs report has
created.
What
happens if your partner won’t marry you unless you sign a prenup? Is this
duress or is this just acceptable pressure. Well the LC report says that the
agreement must be able to withstand challenge on the basis of undue influence
or misrepresentation. Unfortunately this does not answer the question, as it is
only likely to arise when the couples break up. Equally what if that pressure
comes from parents of one of the prospective partners who won’t let the
marriage go ahead unless certain property is not included. Could this be undue
influence, particularly if the weaker party has limited legal advice provided
by the stronger party?
Just
requiring that both parties seek adequate legal advice is not really good
enough when two people are getting married. The reason they would sign a QNA is
likely to be because one party is stronger and one party weaker financially. Can
the agreement still be binding if the stronger party pays for the legal advice of
the weaker party before signing a QNA but, will only pay a certain amount thus
limiting the advice available? Initially the QNA would be correct as far as the
draft bill goes, but if those parties divorce would there be litigation? I’m
quite sure there will be queues of lawyers lining up in years to come trying to
use problems like this as a basis to have the QNA made null and void.
No
qualified lawyer? Then no QNA. Why are
only qualified lawyers, meaning a barrister solicitor or legal executive, allowed
to give legal advice on the QNAs? This is one factor which will almost
certainly exclude the average person from getting a QNA as the cost will
prohibitive. Law firms charge from around £350 +VAT for a prenup currently but
if this legislation comes in then they will be able to put the prices up as
they will have exclusive rights to advise parties. The average person can just
get a nuptial agreement anyway but it would not be qualifying and therefore
could not exclude the court’s jurisdiction in any way.
A
none qualifying nuptial agreement may not be as pointless as it sounds though.
If it is all done adhering to the rules of a QNA with advice coming from
somebody experienced in the field but not a qualified lawyer, it is likely that
a court would take notice of it. The reality is that a QNA only partially
excludes the courts anyway and as even that partial exclusion can be removed
why not save your money and get it done away from the lawyers.
In
fact the whole process of the QNA seems to be a winner for lawyers. With
exclusive rights to advise and the likely increase in litigation they will have
a whole new market made for them and in this day and age where everything seems
to be getting deregulated it seems a little strange.
How
long can a QNA legitimately be valid for? If the parties comply with all the
rules and have a QNA then after 20 years of marriage they split up should the
QNA still stand and more to the point will there be lots of litigation saying
that it should not. Perhaps the LCs inclusion of a variation clause in the
draft bill is the way round this problem as it could be argued that any changes
over the years could be written into the QNA when required. Would people really
want to keep changing their QNA every so often in case they break up, it is
unlikely. A simpler solution would have been to set an expiry date so the
parties have to review and renew if necessary.
Will
law firms be able to provide prenups if there insurance cannot cover the full
risk. If not will it stop law firms completing prenups as they do in California?
This a very difficult question to answer but in the USA some firms have to take
a separate insurance on each prenup they complete because how can a firm charge
£20,000 for a prenup for £100,000,000. I fit all goes wrong and the firm is
held liable then they need something to cover them.
