Property division is governed by the Property Relationships Act 1976 (“the Act”) and covers de facto relationships (same-sex and heterosexual), married and civil union couples, as well as relationships ended by the death of a spouse or partner.
The Act is generally not relevant to property dealings until an application for division is made, usually when the parties have split or the marriage/civil union has been dissolved. However, the Act may apply during a relationship where there is no intention of splitting up.
How is relationship property usually settled?
The easiest way for relationship property to be settled is for the parties to come to an agreement themselves. In this situation, the parties will instruct different lawyers, who will offer independent advice, draw up the agreement and arrange for the parties to sign it. However when the parties are unable to agree, then settlement will be attempted through letters or a meeting between the parties and their lawyers. If an agreement still has not been reached, then one or more of the parties can apply to the Family Court for assistance. The settlement of disputes without having to resort to the court is encouraged, so assistance is provided to achieve this. Almost all cases are settled through negotiation and mediation, as the normal rule of a 50/50 split, usually encourages settlement. Only around 1% of cases will progress to a Family Court hearing. We strongly encourage our clients to settle out of Court where possible.
Division of Property
a. Marriages, civil unions or de facto relationships of more than 3 years Where a marriage, civil union or de facto relationship has lasted more than 3 years, generally relationship property will be divided equally between the parties. An exception to this would be where the Family Court considers there are extraordinary circumstances which make equal sharing unfair. b. De facto relationships of less than 3 years Most de facto relationships which last less than 3 years will not fall under the Act, however, there may be exceptions where there is a child or children, or where one party has made a substantial contribution to the relationship.
Exceptions to equal sharing
The Court has the power to address economic differences that exist between couples after separation which would make equal sharing unfair. The income and living standards of one partner might be much lower than the other’s after separation, so the court has the power to award compensation for that inequality. An example of this would be where one party has been able to further their career due to the other making sacrifices by remaining at home to care for children and maintain the household.
De Facto Relationship Criteria
A de facto relationship is between two parties who are over the age of 18 and are living together as a couple. Generally to be covered by the Act, the parties will need to have been living together as a couple for at least 3 years however, there may be occasions where the Act applies for a shorter cohabitation period, such as if there’s a child, or one party made substantial contributions to the relationship. In deciding whether two people live together as a couple, the Court will consider all the relevant circumstances, including ownership of property, financial circumstances and the reputation of the couple among family and friends. This list of factors is not exhaustive and they are not all necessary to establish a de facto relationship. The Court will make its decision based on the individual circumstances of each case.
Classification of Property
The Act creates an important distinction to be aware of between “relationship property” and “separate property”. This is important because the rules for property division contained in the Act only apply to relationship property. There are two important things to remember; first, essential family property will be classed as relationship property, regardless of how it was purchased. And secondly, all items acquired by reason of the marriage, civil union or de facto relationship will be relationship property. Relationship property may include:
- The family home;
- Family property, such as furniture and vehicles;
- Life insurance or insurance over the family home;
- Any Superannuation scheme if it is based on the fact of the marriage or relationship;
- Property owned jointly by the parties;
- Property acquired by either party during the relationship;
- Property which parties agree is relationship property;
- Trust property: if a trust was formed after the relationship began, it may be the case that some or all of that trust is relationship property;
- Gifts or inheritances which have become mixed with other relationship property;
- Property acquired by one party before the marriage in contemplation of the relationship.
Separate Property Separate property is made up of property which is not relationship property. Usually this will include property that a person owns before entering into a relationship, which will remain separate as long as it is not shared during the marriage, civil union or de facto relationship. You can protect your separate property by entering into an agreement with your spouse or partner (see below).
Death of a spouse/partner
The Act applies in the event that your spouse or civil union partner dies. You will have a choice of taking what is left to you under the deceased’s will, or receiving a half-share of relationship property under the Act. This decision must be made within 6 months of the death, or at the latest, 6 months after administration of the estate is granted.
Marriages or civil unions of less than 3 years
Where a marriage or civil union is of short duration, the general rule is departed from and property will be divided according to the contributions made by each party. If the couple lived together prior to the marriage/civil union, that period may be counted toward the length of the marriage/civil union (which may put the marriage/civil union over the 3-year mark).
Making alternative arrangements
If you do not want the Act to apply to your relationship, you can enter into an agreement to ‘contract out’ of the Act. This will set out how you will own the property and how it will be divided if your relationship breaks down. For example, the have a house which they wish to avoid having to split equally in the event of a break-up. A contracting out agreement usually enables the relationship property to be settled more easily, quickly and with less legal costs. Who can enter into an agreement? An agreement can be entered into by people who are married or in a civil union or de facto relationship. It also includes those planning to be married or to be in a civil union or de facto relationship. 1. What sort of property does it cover? This could include property acquired before the relationship began and/or after the contracting out agreement has been signed. The types of property could include the following:
- Real property such as land or a house
- Personal property such as trust property, superannuation, inheritance or motor vehicles
- Any estate, right or interest in any real property or personal property
- A debt
2. What terms are covered in an agreement? The following are examples of what might be included in an agreement:
- Which property is to be either separate or relationship property
- The share each party has to the relationship property and how that is to be calculated
- The share each party has to the property in death
- Decisions about when each parties share could or will be recalculated (for example at what date or in what circumstances)
- The ownership of gifts made by one party to the other, or gifts from third parties.
3. How to ensure the agreement is legally binding Specific requirements must be met for an agreement to be valid:
- The agreement must be in writing
- Each party must receive independent legal advice (i.e. you cannot use the same lawyer)
- Each party must sign the agreement and their signature must be witnessed by a lawyer, who must certify that the effect and implications of the agreement were explained to the signing party.
If these requirements are not met, then the agreement is invalid and the Property Relationships Act will still apply to your relationship. In some instances, the court may choose to validate an agreement that doesn’t comply with these requirements if the failure to comply has not materially prejudiced either party’s interests. 4. When can the Court overturn the agreement? If the Court deems that if the agreement were to be followed, it would result in “serious injustice”, then the Court may choose to overturn the agreement. The Court would consider the following:
- The provisions of the agreement
- The length of time since the agreement was made
- Whether the agreement was unfair or unreasonable at the time it was entered into
- Whether the agreement has become unfair or unreasonable in the light of changed circumstances since it was entered into, (whether or not those changes were foreseeable by the parties)
- The fact that the parties wished to achieve certainty as to the status, ownership and division of property by entering into the agreement
- Any other matters that the court considers relevant.
How can we help? Please call us to arrange an appointment. In our first meeting with you, we will explain the law, your options and the outcome you can reasonably expect. We will also advise a fixed fee for your case and the likely time it will take to settle. You can contact us by phone on (09) 309 4647. Jeremy Sutton Barristers would like to acknowledge the assistance of NZ MoJ and LexisNexis NZ in compiling the material on this website. For more information, visit: http://www.justice.govt.nz/courts/family-court/
“The information posted on this website is prepared for a general audience, without investigation into the facts of any particular case. This information is no substitute for legal advice and does not create a lawyer-client relationship; you are advised to consult with a lawyer on any legal issue.”