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Buyer's remorse, it's real. Why legal advice and disclosure are crucial in property settlement agreements

Buyer’s remorse, it’s real. Why legal advice and disclosure are crucial in property settlement agreements

Many people have feelings of buyer’s remorse after a trip to the mall or even about their choice of lunch. What about parties who, following a breakdown in their relationship, resolve their property claims by way of a “kitchen table deal” with their partner? As counsel, we are pleased that the parties can communicate amicably to resolve their issues reducing or eliminating stress, conflict, and fees. However, we see many clients who have sober second thoughts about whether they had all the necessary information, including financial information, called disclosure, to make such an important and binding agreement in the moment and/or whether the resulting terms felt “fair” in the light of a new day… or, from more of a legal standpoint, “fair” upon a strict application of the legislation.

The Supreme Court of Canada released the decision of Anderson v Anderson earlier this month, which commented on a private settlement agreement (without disclosure and/or legal advice) between two spouses in Saskatchewan, following a short 3 year marriage. During a meeting with friends, which was initially set up to help broker a reconciliation, but quickly turned into a settlement discussion, the parties agreed (and committed to writing) to resolve their property claims in a final manner. The parties agreed to share the equity in the family home (at a later date, either at a buyout or a sale) but otherwise each would keep their own assets and liabilities without valuing, sharing or making any payments or adjustments to one another.

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Following their agreement, in fact nearly 2 years after their agreement, the husband brought a property claim to value and divide their property in a different manner then was stipulated in their “kitchen table deal”. The husband argued the agreement was “executed quickly and without legal advice or disclosure” (paragraph 55). After a trial and an appeal, ultimately, the Supreme Court said there was a valid deal. The Court stated that the parties were sufficiently aware of their property holdings, and they negotiated their own deal which should be upheld.  The Supreme Court commented that “the agreement was binding and there were no substantiated concerns with its fairness. A lack of independent legal advice and formal disclosure can undermine informed choice, but was not troubling here because the husband could not point to any resulting prejudice: there was no suggestion that the absence of these safeguards undermined either the integrity of the bargaining process or the fairness of the agreement (paragraph 10)”.

Obviously, this is an extreme example of buyer’s remorse in the context of a parties’ property settlement. Most people will not have the means nor the opportunity to have their matter brought to trial, the Court of Appeal and/or the Supreme Court of Canada. Parties entering into deals should, however, think of this case as a warning: if they strike a kitchen table deal without having disclosure and legal advice, will they have buyer’s remorse, or alternatively, will their partner have second thoughts about the terms? If one of the parties has buyer’s remorse, both are subject to the consequences. One party may take steps to challenge the deal but the other has to defend. Neither is immune to the stress, conflict and costs, and neither will have a guaranteed outcome. The Anderson case was decided on a specific set of facts, it was a short term marriage and there was no resulting prejudice to either party. It’s easy to imagine situations, maybe where one party chooses to compromise, that the court may have a different finding.

How can parties best avoid the buyer’s remorse feelings in the first place? Use the amicable communication with your spouse to be transparent and to exchange information. We would suggest that there are two main ways to do that:

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First of all, you can help achieve transparency by being upfront with your financial disclosure. The exchange of financial disclosure can take many forms. Experienced family law counsel can give you opinions on what form might work best for your specific set of circumstances. But the exchange of disclosure will help both parties feel satisfied with their agreement. There will be no, as the Supreme Court calls it, asymmetry of information. Not only can the exchange of disclosure help the other party (and yourself) have more trust in your agreement, it will also help protect it from future challenges.

Finally, you should have information not just from your spouse, but also legal information. One of the best ways to avoid buyers’ remorse is for both parties to have independent legal counsel. As they say, knowledge is power, and when you have legal knowledge on your side to advise where you are compromising, where you may have an advantage and where the potential risks might be, you can enter into an agreement fully informed. Additionally, signing an agreement with Independent Legal Advice, or ILA, is another way to protect it from challenge in the future. The Supreme Court notes that independent legal advice helps to compensate for imbalances or informational deficiencies that may result in an agreement that is substantially unfair to one or both of the parties.

The case of Anderson confirms that, in some situations, kitchen table deals should be upheld. However, involving an experienced family law lawyer will help ensure that neither party experiences the buyer’s remorse that can lead to the stress, cost and time that is involved with these deals being examined. Involving a lawyer does not mean you are ending the cooperation of your spouse. In fact, that cooperation can greatly assist the process and can help you both reach a deal that you can live with for the long haul.

Please call us if you would like help avoiding buyer’s remorse, putting in place an enduring agreement and avoiding the pitfalls the Andersons encountered.