Since 1976 the Property (Relationships) Act has applied to divisions of property when a relationship ends. The law is now 40 years old, even though it was amended in 2001, which including extending it's reach to de facto relationships. The Law Commission notes that 'The underpinning principle of the Act is that “relationship property” as defined by the Act should be divided equally between the two partners upon their separation.'
The Law Commission is currently undertaking a review of the Act, as they note that there has been a significant social change since it came into force. Some of the issues include how Trusts can be used to shut people out of their fair share of the relationship property pie when people split up.
There are a few fundamental things to be aware of if you are in a relationship:
- You can contract out of the act with a legal document (called a section 21 agreement which can cost around $2,000 to put in place)
- You need to get separate legal advice to your partner, otherwise any agreements that you have put in place may be void
- If you don't do anything to 'contract out' with a relationship property agreement, all assets are considered to be joint property and divided jointly if the relationship breaks down.
- If a couple separate and decide to divide their assets without signing an agreement that meets the requirements of the Property (Relationships) Act 1976, then either party may be able to revisit the asset division at a later stage.
Recommendations that are up for public discussion in the Law Commission review include:
- Giving the primary caregiver the right to stay in the family home for a while after they separate
- If one parent owned the home before the relationship, they get to keep the house; only the capital gains are split 50-50
- The parent that sacrificed their career for the relationship should be entitled to a share of their ex-partner's earnings for a limited period after they split
- Having the rules apply to any marriage, civil union or de facto relationship lasting at least three years, unless there's a contract saying otherwise.
For more information on the consultation and process - check out the Law Commission website at https://www.lawcom.govt.nz/our-projects/review-property-relationships-act-1976
Here are some facts of interest to consider when you have relationship property (prepared by Gaillie Miles Lawyers), based on the current law.
- If a couple are in a long term relationship, they could be in a qualifying de facto relationship even if they are not living in the same house.
- If a couple are living together in a house that one of them owned before the relationship started, then the house is likely to be relationship property.
- If parents are gifting funds to assist a couple to purchase the home they will live in, then the gift is relationship property.
- If salary or wages are going in to KiwiSaver or another form of investment, then the KiwiSaver or investment fund will be at least partly relationship property.
- If inheritance monies are used for relationship purposes such as paying off the mortgage on the family home, then the inheritance will become relationship property.
- A partner or spouse can claim a half share (at least) of relationship property assets, regardless of what their deceased partner or spouse's will says.
- If a couple separate and decide to divide their assets without signing an agreement that meets the requirements of the Property (Relationships) Act 1976, then either party may be able to revisit the asset division at a later stage.
- If assets are in a Trust then they could still be at risk of a relationship property claim.
- The best form of protection to all of these relationship property traps is a Contracting Out Agreement (aka a Pre-Nuptial Agreement).
For more information, from the New Zealand Law Society, download this booklet. Dividing-up-Relationship-Property.
