It is becoming increasingly more common for long distance relationships to be the norm where partners may be based overseas. Consequently, many have assets overseas, and may be curious as to how the law handles the division of relationship property.
To begin, you should familiarise yourself with the Property (Relationships) Act 1976 (“The Act”) governing this area of law.
Generally, disputes over property situated overseas as long as they’re moveable and partners are domiciled in New Zealand, the New Zealand courts will have jurisdiction over it.
The term “domiciled” means that at least one partner must consider New Zealand their home or place of residence.
What overseas property is within New Zealand’s jurisdiction?
Overseas assets are defined in s 7 of the Act as classified as
either being movable or immovable. The section applies to immovable property
that is situated in New Zealand, and movable property situated within New
Zealand or elsewhere.
Examples of movable property include:
Proceeds of sale from immovable
Examples of immovable property include:
Leasehold interest in land
When is property moveable or immovable?
Generally, if it’s an movable property situated overseas, New Zealand has no jurisdiction.
Courts may decide under a property relationships proceeding to not enforce equal division of relationship property which is usually the presumption under the Act.
Here are 4 exceptions to the general rule and discretions made to the general rule against moveable and immovable property residing overseas:
Discretion to overseas movables
Various factors influence whether courts will grant an order against someone who is not domiciled in New Zealand in respect to their overseas movables. These factors include but are not limited to:
practicality of costs in
collecting relevant evidence and enforcing the order;
reasonableness of expecting a
foreign respondent to defend themselves in proceedings in New Zealand; and
whether they make up a significant portion of relationship property.
A claim under private international law
Another exception is an action under private international law. This includes a claim between parties under contracts or equity. Equity was developed to supplement the common law where it is unfair.
The exception to land can be made if the overseas immovable property was capable of being a family home at the time of the marriage or de facto relationship. In cases like this, courts would usually adjust the shares of one partners interest in the relationship property.
Agreement in writing
Parties not domiciled in New Zealand can agree in writing for the Act to apply to their moveable and immoveable property situated in New Zealand or overseas. Hence, the easiest way to ensure that you have control is to get a relationship property agreement.
Figuring out your rights and claims to a parties’ overseas property is tricky when the courts have traditionally determined the nature of your property. But even if a court determines an asset is an immovable overseas property, this might not defeat a claim for compensation.
The Property Relationships Act (the ‘Act’) allows couples to “opt out” of the “normal rules”. These rules detail how the Family Court might divvy up your shared relationship property. Do this through a contracting out agreement.
By making an agreement, you and your partner can govern who owns what and how you will divide up relationship property. This is instead of the rules which normally apply under the Act on a separation or divorce.
This is for couples or parties intending to enter into a relationship, whom have assets which may be relationship property. Remember – your agreement will not work (it won’t be legally binding) if you do it yourself!
If you are already in a relationship and looking to separate, ore information about separation agreements can be found here.
How might the Court split our relationship property?
A Court will try to balance the division of property between couples. the Court recognises that there might be unequal bargaining power between couples and so there needs to be a just way of dividing up relationship property. The Act encourages couples to decide freely. This means you both choose how you want to separate property if your relationship ends.
When can I create a contracting out agreement?
Usually couples will get a contracting out agreement when they are newly in a relationship, thinking about getting into a relationship or before marriage or living together.
As with most things, it’s best to get one as early as possible if you think you will need it. This could avoid awkward conversations or potentially expensive proceedings later down the track.
How do I get a contracting out agreement?
You will need an agreement in writing that is certified, signed by both parties and their independent lawyers following independent advice on the agreement terms.
What are some issues to be prepared for?
Firstly, ensure that your partner is willing to agree to get a contracting out agreement. As this process is voluntary, both parties must be committed.
The usual issue with contracting out agreements is that one party may be stopped from giving away their rights without knowing the consequences of signing the agreement or what they are entitled to under the Act. It does this through a certification system.
This means that independent lawyers must provide you with advice as to whether to sign the agreement or not, or put forward better terms for you. There is a higher risk changes to your contracting out agreement will be made if your agreement does not appear to be fair. Fair doesn’t necessarily mean 50/50 but it does need to show that it is not a “serious injustice”.
How do I make sure our contracting out agreement is fair?
The Act also attempts to prevent a partner from entering an agreement when the other partner is bullying them into it.
A court can, even if an agreement satisfies the criteria under the Act, still set aside an agreement if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice. There are a few factors a Court will look at which will be important to consider in your agreement:
whether the agreement was unfair or unreasonable in light of all the circumstances at the time it was made;
whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties);
the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering the agreement and of course any other matters that the court considers relevant.
The best way to ensure your agreement is fair might be by asking a trusted person. You can run this past close family or friends to see what they think of your agreement terms. Use common sense here to save yourself hassle down the road if lawyers disagree!
I brought ‘x’ into our relationship. When does our separate property become relationship property?
Each party will have to define what assets could be classified as ‘separate property‘ and what property could be classified as ‘relationship property‘. The Courts will recognise if the non-owning partner contributes to any increase in value of the other partner’s separate property. This increase is deemed ‘relationship property’ and thus equally shared.
Note that this may well include indirect contributions too.
Contributions do not have to be financial ones. Looking after the family home or children can be deemed a contributing factor. The Courts will take this into account when determining division of property.
When should we update our agreement?
Your agreement will not last for an eternity. It won’t cover all future assets that you acquire throughout your relationship which might be considered relationship property. The longer you leave an old contracting out agreement, the higher your risk. It is safe to update your agreement when your circumstances change. This might be after a particular event or every couple of years.
We are heading into a new relationship. What if we start a family?
That is great! But children can add complexity to your agreement – not to mention relationship! This means this is a factor to consider if you see the potential or are trying to start a family together. Our lawyers will advise you on this. It will likely mean that additional clauses will need to be drafted into your agreement. This is to take into account what happens if one partner has to take time off to take care of children later on.
We have agreed on what’s mine etc., what next?
You will need this contracting out agreement certified by a lawyer. CODR provides this service as a package so that it is easy for you and your partner to get this done if you use our agreement. We strive to make this process as simple, stress-free and predictable as possible. We provide one affordable fee. However, our lawyers are independent. This means they will have your best interests in mind.
Our situation is complex. Where do we go to for help?
CODR always does a preliminary assessment as to whether a contracting our agreement suits your situation. We also have the option of our lawyers providing you with tailored legal advice. Please enquire with us. We will see how we can help. If not, we may be able to direct you elsewhere.
This question is frequently asked by couples, wondering whether they should get a prenup agreement. Depending on your situation, we think this is a good idea.
Recently this was the topic of a NZ Herald article, showing more and more couples consider this normal.
First of all, a prenup enables partners to ‘contract out’ of the equal sharing of relationship property under the Act.
The broad definition of what makes up ‘relationship property’ means you could be sharing your assets with your long-term partner.
Assets which you have brought solely could be relationship property. This is might be a house which only you owned before the relationship started.
This could put your financial situation in jeopardy. That is, assuming you do not intend to share your assets with your partner. No doubt if you want to keep your assets which you brought into the relationship separate, you should get a ‘prenup’.
When should you get a prenup?
The Property (Relationships) Act 1976 applies once the parties have been in a qualifying relationship.
These are usually a marriage, a civil union or de facto partnership for 3 years. A qualifying relationship under the Act has its own definition.
Factors for a qualifying relationship might include:
How long you have been in relationship;
How financially dependent you may be on each other;
The ownership and use of shared property;
The degree of mutual commitment to a shared life or
The reputation and public nature of the relationship.
These factors are only examples.
Am I in a “de facto relationship”?
The Act almost definitely applies if a couple have been living together for 3 years. But it might not be necessary to have lived together for this long or to have shared finances to be deemed a couple.
Most noteworthy, in the case of Scragg v Scott  NZFLR 1076, the parties only lived together for short periods of time because of Mr. Scragg’s overseas work.
Therefore no continuous joint living period occurred of more than nine months. The Judge described their living arrangement as a de facto relationship under the Act.
This was on a broader consideration of the nature of a relationship contained under section 2D of Act. The Judge considered the mental aspect described as “a commitment to a continuing future relationship.”
What if you live separate from your partner?
If you live in separate houses and don’t share finances you might still be in a “de facto relationship”.
Similarly, the High Court in Moon v Public Trust and Anor  NZHC 1169 expanded the scope of the definition of “de facto relationship”.
Although the parties had lived in their own separate homes, it was still considered a de facto relationship.
In addition, the couple shared few common household possessions for the entire 27 years of their relationship. But Justice Powell did not view the lack of common physical assets as going against a relationship.
Instead, the deceased’s health, and the plaintiff’s home-based business made it unreasonable to expect shared living arrangements.
When should you get a prenup agreement if you are in a de facto relationship?
Certainly, CODR recommends getting a prenup agreement within the first 3 years of the relationship.
The longer you leave it, the greater the risk, the harder the conversation – and the more expensive it could eventually be.
If you are separating out of a marriage or de-facto relationship, or getting a divorce, you should consider getting a separation agreement. Other than Court, it is the only valid way of dividing relationship property once a relationship ends. Some people do this process informally, however, this can result in arguments and Court down the line.
But going to court can be very costly. While the relationship is still on good terms, you might want to negotiate a separation agreement.
You might like to refresh your knowledge of what Relationship Property means before you continue reading this article. Essentially, your separation agreement allows you to dictate how your assets will be divided. If you get a valid separation agreement, this will override the provisions of the Property (Relationships) Act 1976. But in order for it to be legally binding on both parties, the Separation Agreement must be:
Signed by both parties;
Following independent legal advice; and
A lawyer has to sign and witnesses your signing. This lawyer also certifies that they explained the effect and implications of the agreement to you.
Similarly, your partner will also need an independent lawyer doing the same certification.
What you can expect in our Separation Agreement ‘template’:
Our CODR separation agreement includes aspects such as:
The date on which you agreed to separate
The maintenance of one spouse or partner by the other if appropriate
Arrangements for day-to-day care of or contact with children of the relationship
Debts or other hire-purchase collateral owned under both names
The Family home
Dividing up personal property
Things to include in your Separation Agreement
If you are married or in a civil union with your partner and you later decide to apply for a divorce, you can also use the separation agreement as evidence that you have been apart for 2 years. It is necessary to show that you’ve lived apart for two years before you can apply for a divorce.
Before you go ahead and purchase CODR’s Separation Agreement, here are some key things most couples think about when they get a separation agreement.
The Family Home
One of the main assets couples own is the home. You could also have jointly-owned chattels. Think about your family car, household furniture and other ‘big ticket’ items.
Regardless of who paid for the Family Home, it will usually be relationship property.
When you separate, you can sell the main Family Home. The sale will be divided in half and shared between you and your partner. Otherwise, one party may keep the house and buy the other partner out. This might be desirable if you have children to consider.
In the Family Court, the judge guides their decision by general principles. You might like to think about these principles when dividing your own relationship property:
That since each partner has contributed equally to the relationship, the assets will be shared equally too i.e. split in half
The Court won’t look at who is ‘at fault’ for breaking up the relationship
Unpaid domestic work has equal value to economic work
However, your separation agreement does not have to divide your assets in this way. If you are purchasing a separation agreement and then seeking your partner’s approval, you can show them that you have thought about fair terms.
What about Separate Property?
But you and your partner may also have other assets which are not relationship property.
An example is other investment home(s) which are not the Family Home. This could be ‘separate property’ which does not come under the Relationship Property Act if it can be determined to not be relationship property. Separate property remains the property of the partner who owns it.
Situations can get complicated. For example, sometimes both partners own a home capable of becoming the family home. Generally, when relationship property is to be divided, the home of only one partner will be considered the main Family Home.
Separate property can include property one partner got while they were not living together as a couple. Or it can be property that a partner acquires from another such as an inheritance (unless this property gets mixed with relationship property). If you need legal advice on your individual circumstances, CODR can help you find Family Law experts.
If you have children from your relationship to consider, our Separation Agreement, does allow you to detail what your day to day care and contact of your children will be, access and other major decisions regarding the upbringing of your child or children if they are still minors.
The court will only be concerned only with what is in the best interests of the children when they consider child-care arrangements.
Your own or your partner’s debt
You or your partner can be liable for any personal debts (even if they are solely in your partner’s name) if they are considered relationship debts. Relationship debt includes any joint debts or debt that is solely in your partner’s name if:
the debt was related to the relationship property. For example you used it to get a loan on a car you both used, or for a business you both benefited from;
the debt was for the benefit of both partners. For example rent, debt to buy furniture;
the debt is the result of the cost of bringing up any children you have together.
You can deal with how to divide up any joint debts or whether one party takes these debts over and provides an indemnity for that party not taking over the debt.
Think about your current credit card debts, any remaining hire purchases, student loans etc. Your lawyer will ask for more information if there is not enough details in your separation agreement. We recommend you spend some time listing these out with your partner.
What about Kiwisaver?
If you have contributed to Kiwisaver after your relationship started, or another employment scheme such as the Police Superannuation or other government scheme, then you need to share this amount with your partner when you separate.
Generally, this will be split in half. Your certifying lawyer will need to see proof of the value of your Kiwisaver – unless it is only a small amount.
You can withdraw your Kiwisaver on the grounds of significant financial hardship and serious illness. Your Kiwisaver scheme manager will need to be reasonably satisfied that you or your partner is suffering or is likely to suffer significant financial hardship. Then you can make a significant financial hardship withdrawal. Significant financial hardship includes significant financial difficulties which can come up after separation.
Finally, is your agreement fair?
If you do have to go to court, it is likely that the judge will determine whether:
the agreement is fair;
you both worked on the agreement without pressure and entered into it freely;
it covers all your assets after full disclosure.
The extent to which a judge will stay with your agreement reflects the level of his acceptance of the above three points.
If one of you is in breach of the deed of separation and the other goes to court to enforce it, the judge can alter the terms of the agreement.
A separation agreement is useful in so many ways. It allows for certainty, it ensures your separate property stays your separate property, and probably most importantly, it helps to give parties closure.
Buy your Separation Agreement Now
People are increasingly turning online to meet their everyday needs. Technology can make this a more satisfying, efficient and easier process. This is exactly the aim of CODR, an online dispute resolution platform and service.
CODR offers the following ‘DIY’ services and steps so that you can move on:
Purchase our agreement. It will automatically generate your tailor-made agreement.
Contact us to certify your document with our expert Family Lawyers.
Go ahead and put the terms of your agreement into action if needed.
Things such as Family Trusts and businesses can make your situation more complicated. Please talk to one of us at the CODR team about your situation.
If you have a dispute over relationship property, CODR can also help you resolve this if both parties are willing to negotiate or arbitrate. Otherwise you can consider what your options are with our Family Law experts. Please contact us on what your next steps may be.
Disclaimer: Any information we provide is general information. Please do not rely on the contents of this article as legal advice. CODR is not a law firm or a substitute for a law firm.
“See you in court” might be very satisfying to say after a bitter break-up, however, this strategy may not serve you that well in the long term.
We have written on the key aspects of relationship property disputes before and your options when you have a relationship property dispute. However, we are now offering a service where a couple can quickly and easily settle relationship property issues themselves after a relationship breakdown.
The mechanism is aseparation agreementand it is what we recommend for all parties that are still on reasonably good terms with each other. The other three forms of resolution – mediation, arbitration or the courts all take significantly more time and cost a lot more money.
After purchasing the separation agreement, a previously loaded set of questions obtains all the relevant information from you and inputs it into your agreement – creating it “automatically” and without the need for a lawyer to spend their time drafting it.
However, for a separation agreement to be enforceable, both parties must receive independent legal advice and have the agreement certified by their advising lawyers. We also offer this certification process via CODR.
For an agreement, advice and certification from two lawyers, the cost is normally between $1500 – $1800 + GST (depending on the complexity of your particular agreement).
If it’s possible for you, we think a self-directed separation agreement should be your preferred option given its time, cost and stress savings. If you have any questions, please don’t hesitate to call one of the team at CODR on 0800 263 700.
We often see disputes where the parties do not want to go to court. This could be because of the cost of the court process, or some other reason entirely. In these cases, we often suggest mediation for the parties. Mediation is frequently considered as a way to resolve a dispute that requires relatively low investment of time and money. While this is the case, there are even steps you can take before mediation to resolve a dispute:
Focus on emotions.
A study done by neuroscientist Antonio Damasio focused on people with damage in the part of the brain where emotions are generated. They all seemed normal except for the fact that they could not feel emotions. They also all had something else in common – they could not make decisions. They could describe what needed to be done logically and rationally, however, they struggled to make even simple choices (such as what to eat).
In our experience, the resolution of disputes is almost always significantly impacted by emotional drivers. Knowing this, ask yourself what could be responsible for leading you to this dispute. Could one party feel their expertise hasn’t been recognised? Or maybe one party feels their contribution hasn’t been given the respect it deserves?
Consider these questions and others and ask yourself how some of the damage can be undone.
Be objective in your communication.
Attempt to express your feelings in a way that is clear, appropriate and professional. Also focus on “I” rather than “you” statements. This helps to reduce defensiveness. For example, “I am upset that my effort has not been recognised,” rather than “You are in the wrong because you haven’t noticed everything I’ve done.”
We believe in-person communication is best, closely followed by a phone call. Tone is often hard to decipher in an email and this method of communication should be used with this in mind.
People want to be heard. And they want to know they’ve been heard. While this is very difficult to do, when the other person is talking, don’t try and think of a sharp response – just listen to what they’re saying. It’s subtle, but the other person will notice.
A technique to demonstrate that you’ve been listening is to briefly summarise what the person has been saying to you. If there are any inaccuracies, the other person should correct you. Keep going back and forth until you receive a “that’s right” in relation to one of your summaries.
Take responsibility for your own actions and behaviour.
If you think you’ve been at fault (and you probably have in some way), admit it. Appropriate concessions not only make you look reasonable overall, but it also makes you more credible on issues where you stand your ground.
A win-win situation can come from adding elements to the negotiation/dispute that you didn’t consider to be relevant. This ties in with tip number 1 (focus on emotions), once you have established the emotional drivers, consider creatively how they can be met to satisfy the counterparty.
Hopefully, with these 5 steps, you can resolve your dispute without experiencing further time and money costs.
What to do when a relationship property dispute arises
Property division between partners following the end of a relationship can become a complicated and drawn-out process. This is sometimes the case because parties may feel that filing Court proceedings against one another is the only way forward. Indeed, the NZ Family Court is designed to facilitate effective family dispute resolution, however, individuals can avoid the stress, cost and time associated with Court proceedings, by creating an enforceable property division contract of their own. This course of action can be facilitated by lawyers, mediators or arbitrators with special expertise in family law, even if agreement or good will between parties is lacking. This article provides some information on these out of court avenues. Note that the information provided here is intended as a guide only. If more information is required in relation to a personal property dispute, it may be that the team at CODR can help by providing more information.
The Family Court
The Family Court is empowered under the Property Relationships Act 1976 (the Act) to order division of relationship property in the event of a marriage, civil union or de facto relationship ending. For a brief account of how the Act requires the Courts to categorise, evaluate and divide property between individuals, see “Relationship Property – The Fundamentals”.
Filing an application with the Family Court may be appropriate if urgent steps need to be taken, as the Court can make interim orders that are immediately binding. The Family Court may also provide the most suitable forum if multiple and varying claims need to be dealt with. For instance, a relationship property dispute can be heard in the Family Court alongside a family protection claim or some other matter implicating a third party who may be unwilling to become involved in alternative forms of dispute resolution.
However, these scenarios aside, Court proceedings can be time-consuming and unsettling for all involved. Standard court procedure, as well as file backlogs can result in significant delay for parties. Further, so long as the dispute does not involve a vulnerable person or a minor younger than 18 years, accredited news media representatives are granted full access to proceedings.
Dealing with relationship property disputes through the Family Court can also become very costly, especially if evidence is lacking or a point of law arises which proves complex. Pursuant to the Family Courts Fees Regulations 2009, an upfront $700 filing fee must be paid for any application lodged. If the dispute is heard before a Judge, an additional $906 fee must be paid for every half-day. Legal fees also need to be added to the total cost of proceedings.
Finally, filing an application with the Family Court is sometimes not a viable option if considerable time has passed since the relationship in question ended. For those previously in a marriage or civil union, court proceedings must be filed within 12 months of its dissolution (this is usually taken to be the divorce date). For those previously in a de facto relationship, proceedings must be filed within three years from the point at which the relationship ended.
For the reasons stated above, dealing with a relationship property dispute in Court can be stressful, prolonged and costly. However, these shortfalls of the Court system can be avoided if parties choose to work through their relationship property dispute via alternative dispute resolution services.
Alternative dispute resolution services
Disagreements over relationship property are particularly well suited to out of court management. This is because the Act expressly allows for dispute resolution by contract. This means that so long as certain requirements are met (as set out in the articlementioned above), and so long as the contract adopted by the parties does not lead to outcomes that are or become seriously unjust, relationship property contracts are binding and enforceable.
Arbitration can provide a speedy and cost-effective way to resolve property disputes. Unbound by court protocol, arbitrators can speed up the dispute resolution process considerably. Further, arbitrator fee structures can be negotiated and fixed at the beginning of the dispute resolution process, and forum and service fees can be avoided or significantly discounted .
Arbitration also affords complete privacy to parties. The number of persons involved in the property dispute and contract formation process can be reduced if desired and the opinion of intimately affected third parties such as children or dependents can be integrated into proceedings flexibly. Further, parties can agree upon an arbitrator of their choice.
Another advantage of this kind of dispute resolution is the ability that the arbitrator has to gather information. Though a Judge in the Family Court can order discovery, request affidavits and make interlocutory orders, she is still bound by standard Court procedure. Alternatively, an arbitrator can arrange a one-off meeting, calling parties, lawyers, accountants and any other relevant parties as witnesses. This power, in practice, often leads to speedy and effective information collection, a crucial requirement for successful dispute resolution and contract formation.
Mediation can also be an effective way to resolve relationship property disputes. Like arbitration, this avenue can offer parties a streamlined, confidential and cost-effective dispute resolution service. As stated above, simplified processes and agreed upon fee arrangements can result in significant cost reductions, and procedural flexibility can lead to thoughtful and effective outcomes.
Importantly however, the role of a mediator differs from that of an arbitrator. Whereas an arbitrator will hear submissions from both sides before arriving at a considered decision (thereby acting as decision-maker), a mediator facilitates and guides the parties to define issues, produce relevant information and arrive at a consensus. Mediation therefore can prove very effective if goodwill remains between the parties, or, even if not, if there is a will to achieve a timely and confidential settlement that the parties can live with.
It may be that a trained mediator or arbitrator is not necessary for two parties to arrive at agreement as to how their relationship property should be divided. In this case, the help of a lawyer on the part of both parties may be all that is required. This avenue may be the simplest and most cost-effective way forward, especially if both parties are largely in agreement as to how they wish to divide their property but need reassurance that their agreement will be enforceable. There are particular requirements that have to be met for such an agreement to be enforceable, including that each party have had independent legal advice before signing the agreement and that the lawyer certifies that he or she explained the effect and implications of the agreement to the party before signing. For more information see “Relationship Property – The Fundamentals”.
Because NZ Lawyers are required to follow certain standards of professional behaviour, any insight a lawyer gains into private family arrangements remains strictly confidential. Such standards also insist that fees charged by lawyers are reasonable and fair.
Negotiating an agreement which sets out how relationship property is to be divided between partners following the end of a relationship, with the help of arbitrators, mediators and lawyers is advantageous to the extent that much time, money and stress can be avoided. Indeed, the statutory regime encourages these options. If you are interested in engaging in any of the dispute resolution processes mentioned above, CODR’s online platform can be used to bring all parties together to arrive at the appropriate outcome confidentially, expertly and efficiently.
Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 CODR 00.
The Property (Relationships) Act 1976 (“The Act”) applies to partners seeking to divide their relationship property following the end of their marriage, civil union, or de facto relationship. This article provides a brief account of how the Act enables NZ Courts to categorise, value and divide property between individuals who have not been able to come to an agreement of their own.¹ Note that the information provided here is intended as a guide only. If more information is required in relation to a personal property dispute, the team at CODR may be able to help by providing more information.
What is the Property (Relationships) Act 1976?
The Act is a wide-ranging piece of legislation which sets out how property between partners is to be divided in the event of separation (by death or otherwise). The purpose of the Act is to provide the Family Court with a fair and objective framework to be used for the purpose of dividing relationship property between partners in disagreement. This framework is intended to recognise the equal and sometimes varying contributions made by both partners to the fruits of a past relationship, as well as to provide for the interests of children.
Who does the Act apply to?
The Act applies to all married couples, individuals in a civil union and people in a de facto relationship.
What is a de facto relationship?
A de facto relationship is a relationship between two individuals who “live together as a couple”. In judging whether a relationship is de facto or not the Court will have regard to:
The duration of the relationship;
The nature and extent of common residence;
Whether or not a sexual relationship exists;
The degree of financial dependence between the parties;
The kind of ownership, use and acquisition of property;
The degree of mutual commitment to a shared life;
The care and support of children;
The performance of household duties; and
The reputation and public aspects of the relationship.
Generally de facto relationships shorter than three years are not covered by the Act. The Court will only make orders concerning short de facto relationships if two specific requirements are met. First, the applicant must have either made:
a substantial contribution to the relationship; or
there must be a child of the relationship. For instance, a child of one of the partners, or even a child who was “a member of the family of the de facto partners”, at the time the couple ceased to live together.
Secondly, for a Court to make a ruling in relation to a short de facto relationship, the Court must be convinced that failing to do so would result in serious injustice, such that without Court intervention the resulting property arrangement would leave a contributing partner seriously disadvantaged.
Other kinds of de facto relationship not covered by the Act include:
Relationships ending before 1 February 2002; and
Relationships between people under 18 years.
What does the Act apply to?
The Act applies to any property owned by a partner.
“Property”, is broadly defined. Typical examples are the family home and chattels and businesses, but the term can also include, for example, rights or interests in relation to a trust, non-transferable licenses and insurance pay-outs. The value of the property in question is usually measured at the time of the Court hearing.
Also, an “owner” of property is also broadly defined as any person who is the beneficial owner of any property in law.
The Act is specifically worded to protect the rights of creditors. Therefore, any kind of agreement or transaction (involving relationship property) that intends to defeat the rights of a creditor, will be unsuccessful.
The way in which property owned by partners is to be divided (or the question of whether it is divided at all), depends on whether the property is classified by the Act as “relationship” or “separate” property.
What is the difference between relationship property and separate property?
The Act draws a distinction between relationship property and separate property. The term “relationship property” will usually include:
the family home, and family chattels (for instance family vehicles, furniture or other belongings used for family purposes) whenever acquired;
property owned jointly or in common by partners;
property acquired during the relationship, or in contemplation of the relationship and intended for common use or benefit (for instance, a wedding ring or engagement gifts);
sources of family income (such as family businesses or investments);
any increases in the value of relationship property, or any income derived from relationship property, or any proceeds from the sale of relationship property (for instance, the increased revenue of a family business, or income gained from the sale of a family car).
Property that is not relationship property is separate property. Separate property tends to include:
property acquired by gift, succession or survivorship (so long as it remains separate and is not mixed with relationship property);
property acquired as a beneficiary of a trust settled by a third party;
property acquired at a time when partners were not living together (for instance, after separation but before Court proceedings);
property acquired “out of” separate property, or the sale of separate property, or any increases in value of separate property (for instance, any income received from the sale of an inherited house).
Whether the property in question is classified by the Court as relationship property or separate property, will affect how the value of the property will (or will not be) divided.
How are these different kinds of property dealt with?
If property is classified as relationship property, partners are generally entitled to a half share of the property’s value. This general rule will only be departed from in certain limited circumstances, including if a relationship was of a short duration, or if failing to do so would result in an outcome that is repugnant to justice due to extraordinary circumstances.
On the other hand, if property is classified as separate property, it is not generally required to be shared with the non-owning partner. However, it is important to note that an increase in value of separate property can become relationship property if that increase was attributable to the “application of” relationship property, or the direct or indirect actions of the non-owning partner. For instance, a family business passed down from mother to daughter may be the separate property of the daughter. But if a partner becomes involved with the running of this business and increases its profits, the non-owning partner will have a claim to this increase in value under the Act.
The Act is an opt-out system. This means that if a couple have entered into an agreement which regulates the division of relationship property in the event of separation, this agreement is enforceable. In order to contract out of the PRA effectively, the following requirements (except in exceptional circumstances) must be met:
The agreement must be in writing and signed by both parties;
Each party to the agreement must have independent legal advice before signing the agreement;
The signature of each party to the agreement must be witnessed by a lawyer;
The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement; and
The consequences of the agreement must not be extremely favourable to one party at the expense of the other.
¹ For more information on solving relationship property disputes out of court click here.
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