A quick Google will let you know that there are several ways business assets can be exposed to relationship property claims. Claims can be made for a share of your business assets by your spouse or partner after you separate. That means it is important to protect your business. Give yourself – and your business partners – certainty that a change in your relationship status won’t have adverse outcomes for the business.
How do you protect your business assets?
Take the safe route, get a prenup! Outline exactly how you want your property to be divided. You can choose to specify how the business assets will be divided, or even simply that the business remains separate property.
How can CODR help?
Our goal is to make the process of getting a prenup easy. It’s all done online, without the need to even leave your home! We provide a DIY prenup for $172.50 with expert assistance to help you along the way. We also provide two lawyers at a fixed price who can make the agreement legally binding. Find out more about our Relationship Property Agreement or contact us with any questions you may have.
Things to remember:
Relationship property is not all about the family home or furniture. It is important for you to understand how YOUR business assets can be susceptible to relationship property claims. If in doubt, get legal advice, we have a team of experts who can help!
Trusts will not always protect your business from relationship property claims. Again, if in doubt, get legal advice, again, we can help, get in touch with us!
It is important to ensure any prenup is fair, as the court can overturn agreements which result in “serious injustice”.
Your business assets can be exposed to a relationship property claim. Protect your business, get a prenup!
What happens to the bach, the boat and your superannuation?
It is no secret that when married couples and de facto partners separate, each individual is typically entitled to a 50% share of all relationship property under the Property (Relationships) Act.
What you and your partner may not realise is that your superannuation falls within the definition of relationship property. Given the Law Commission has identified that superannuation, second to the house, can be one of your most significant assets it is important to know how it may be divided if you and your partner separate.1
So how and why is your ex entitled your superannuation fund?
It may seem counterintuitive that your ex could benefit from a superannuation fund that you, yourself, cannot touch until you reach the age of 65. The good news is that property acquired before your relationship is usually treated as separate and will not form part of the divisible superannuation amount. However, the current law says that any increase to your superannuation during your relationship will be divided equally – irrespective of who contributed the funds.
In the event that you do have to give your ex a percentage of your superannuation the process is not as simple as transferring the money from your superannuation to theirs. The most common arrangement involves handing over another asset that is equal in value, such as a lump sum of cash, the boat, or a greater share in the house.
If your pool of relationship property is not large enough to hand over a lump sum, a loan may be an appropriate alternative.
That said, where neither of the above is an option, the court can make an order directly to the manager of your scheme to release the superannuation funds.
The effects of COVID-19
One of the effects of Covid-19 was the plummet of superannuation fund balances, leaving many funds worth far less than their pre-COVID-19 value. In valuing personal property, the court assesses the amount owed at the date of separation. If you and your partner separated pre-COVID-19, this could have a significant impact on the amount of your super that your ex is entitled to. The expected percentage of your superannuation payable to your partner may reflect an amount of money that no longer exists.
How we can help
Separations are stressful enough, and going to court can add a costly and timely burden. COVID-19 is expected to lead to a spike in separations, exacerbated by lockdown, forcing family tensions to bubble to the surface.
If you’ve separated and need to take care of your assets, our Separation Agreement can help. On the other hand, if you’re entering or already in a relationship, a prenup (Relationship Property Agreement (RPA)) can help provide certainty for the future. Asking your partner for an RPA may not be the most romantic gesture in the world but, in all this uncertainty, there has never been a better time to secure your assets.
Ultimately, our law means that you are entitled to make your own decisions about how to divide your assets. Therefore, instead of leaving it to the Act and the courts to split up what is yours, a prenup or separation agreement is an efficient and cost-effective option.
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 lawyer.
1Law Commission Review of the Property (Relationships) Act 1976 (NZLC R143) at 15.43.
There are many reasons couples get a separation agreement but the below are the top four common reasons we get approached for our service.
1. The bank told you to get one
More and more it seems people contact us because they need to get a separation agreement before the bank will take someone off the mortgage.
2. The boat, the car, or the motorbike?
Not much more to say, except no one wants a sharing arrangement for their vehicle.
The last thing you want to be doing is paying off your ex’s student loan.
Sort out that thing you put your property into and don’t really know much else about it, except now you want your property back out.
Rental properties, savings, your favourite couch, whatever it is, there are things you want to make sure you keep when you separate.
Separating is already a difficult process and the thought of involving lawyers only adds more stress. Where do we even start? Lawyers are expensive, how much will it cost? We know what is ours, why do I need a lawyer complicating it? How long will it take?
Well CODR is here to make the process easy for you. Whether the bank is making you get one, or you want one for any of the above reasons, we are here to help.
Pricing structure for Certification/Advice (incl. price for two independent lawyers). See what you might expect to pay when you certify your separation agreement through CODR*
$1,500 + GST
Our Basic package is best for dividing assets and liabilities like:
A family home
KiwiSaver and superannuation
Family chattels (such as boats, furniture, jewellery, etc)
$1,750 + GST
Your agreement will be Moderate if you’ve got some more sophisticated assets or you need legal input to ensure the agreement is effective in your particular circumstances. In addition to the assets included in the basic agreement, there will likely be some of the following:
Adjustment payments (where one party pays the other to compensate for an unfair asset divide)
Unfairness between what each party ends up with following separation
*If you have a trust, we will work closely with you to find the best course of action and cost. Depending on the trust arrangements required, the agreement could be a Complex rather than Moderate one.
$X,000 + GST
The price for a Complex agreement is difficult to estimate, but CODR will either provide a quote or help facilitate an ongoing arrangement between lawyers and clients.
A Complex agreement is likely one where a significant amount of money is being divided, large businesses, complex trusts or businesses alongside the other factors already included in the Basic and Moderate packages.
The Law Commission has recommended continued support for pre-nups in any legislative change. Relationships fail and a third of marriages end in separation. Going to court is notoriously slow and expensive.
The New Zealand Law Commission in its 2019 review of Relationship Property said:
The law should continue to enable partners to make their own decisions about how to divide their property before or during a relationship, and in order to settle any differences that arise between them. The procedural requirements in the law should continue to apply (meaning the agreement must be in writing and witnessed by a lawyer who gives independent advice about the implications of the agreement).
The law strikes the right balance between allowing partners the freedom to make their own agreements about how their property should be divided on separation, while protecting vulnerable partners by ensuring that they enter such agreements with informed consent.
So, the law is going to continue to allow for these agreements and to support them unless they are “seriously unjust”.
The 2019 Grant Thornton Relationship Property survey found:
Growing apart/falling out of love was by far the most common reason for separation, named by 75% of respondents, up from 67% in 2017. Extra-marital affairs were second, up slightly at 57%, with unreasonable behaviour also up slightly to 31%.
Relationships of between 10 to 20 years are the most likely to separate.
Those in their forties are the most likely to separate but there was a strong rise in the need for advice on separation agreements and pre-nups for the 50+ age group.
The most common relationship property pool included assets valued from $500,000 to $1 million.
The number one problematic issue encountered by family lawyers was systemic delay in the Family Court.
Many lawyers think court time allocation for relationship property cases has become worse.
Statistics New Zealand’s 2019 report “Good things take time” told us that people are getting married later and less often, having children in their 30’s and separating at the same rate (overall about a third of marriages end in separation).
Far more people are living together as couples these days and once they have lived together for 3 years or more, Relationship Property law applies to them (even if they don’t want it to).
With property prices as they are (the NZ median house price in March 2020 was $665,000) many first home buyers are going to be borrowing from the bank of mum and dad. If you want to protect that money, you are going to need a pre-nup. Otherwise, after three years living together, the house will be relationship property and the presumption is a 50/50 split of the net value.
Relationships fail and the courts can’t deal with disputes quickly or cheaply. There is often a lot of money at stake, and you want to be able to sort it out fairly and efficiently.
So if you are in a relationship, don’t risk it, spend now to secure your assets.
There is one thing that comes to mind when I hear the word prenup: sensible, but awkward. It would be the sensible thing to do, but so would not buying brunch every weekend. So why?
Well at some point in the next 3 years I am going to stumble into a de-facto relationship without even knowing it. At which point, as far as the Relationship Property Act is concerned, I am married to the lucky person. Imagine if after 3 years of eating at your favourite café you got an equal share in its business. I mean, you contribute to the business by buying eggs Benedict there every weekend, so maybe you should own some of it. But is this necessarily fair?
How does the law work?
This is the somewhat peculiar logic applied by the Relationship Property Act, which currently governs how relationship property is dealt with (which becomes pretty important when people split). Under the Act, property should generally be divided equally between partners based on the family use approach. This means that if you were lucky enough to buy a house while single (apparently it is possible), then found yourself in a relationship and sharing the house for 3 years, your partner would effectively own half the house. This logic applies to all property (except taonga and heirlooms).
However, the Act also gives couples the ability to “opt out”, meaning they can agree for themselves how their assets will be owned and divided if they split up. Such agreements must be in writing and are commonly referred to as “prenups” (in American soap operas) or (here in New Zealand) relationship property agreements or “RPAs”.
The Law Commission recently conducted a review of the Relationship Property Act and outlined 8 ways the family use approach can end in unfair outcomes. Without delving too far into them, they typically highlight the unfairness related to an equal division of property when one person has contributed more.
In the course of the review, the Law Commission made several recommendations for how our law could be changed to better address issues around relationship property. Fortunately for all of us, one of the recommendations made was that there should be an entirely new Act. Unfortunately for us, the slow-moving wheels of democracy will most likely delay that for the immediate future.
How do relationship property agreements fit in?
One of the Law Commission’s recommendations was that the ability to opt-out of the Act should be retained and improved. This serves as reassurance that prenups will continue to be effective, despite the uncertain future of the current Act. Furthermore, the introduction of a section dedicated to the use of audio-visual technology will ideally be included. We think the future of CODR’s RPAs is secure.
Despite this, as with any new Act, the ramifications may remain opaque until tested in court. It has become apparent that the best way to ensure the best outcome for both your partner and you is to simply get an RPA. At the sacrifice of an awkward conversation, it allows you to feel secure and retain control of your assets. Better to decide yourselves what happens to your property, than leave it to an old Act that is well past its use by date, or a new Act that will likely have its own growing pains.
With the above in my mind, instead of asking yourself why get an RPA, maybe you should be asking, why let someone else decide what happens to my assets?
Important things to remember:
RPAs can be set aside either fully or partially by the court if they are found to cause serious injustice.
RPAs are void unless both partners receive independent legal advice on their effects and implications and are subsequently certified by separate lawyers (the court can give them effect in some circumstances).
Getting an RPA is considerably more cost effective than a trip to the Family Court.
It is rare that you get the opportunity to simply opt-out of law.
De-facto relationships are on the rise in New Zealand (Stats NZ).
You need to make sure you’re aware of when you become de-facto and what that means.
You can get an RPA at any point in the course of a relationship.
Can you still keep, or get rid of, your family home or investment properties after you separate? Of course!
What is a “Buy Out”?
A mortgage buyout is one solution if you and your partner separate but still have mortgage obligations and one partner wants to keep the house. A Mortgage Buy-Out involves one partner purchasing the equity interest of the other.
But make sure you have this conversation with your partner early – mortgage buyouts require both owners to co-operate.
Steps to buying your partner out
To be able to buy your ex-partner out, you need to be able to take on the whole mortgage on your own and have enough to pay your partner for his or her share of the equity in the property.
Get legal advice
Get valuation on the family home or properties to be divided
Agree on your partner’s “buy-out price”
Get a separation agreement certified. This is legal and binding on both of you rather than just a “hand-shake” deal with risks!
Settle your new mortgage (if necessary)
Can you afford it?
The first question you should ask yourself is if you are financially in a position to afford the mortgage payments. Secondly, will the bank agree to you being the sole mortgagee? Note that when you separate, you are (usually) splitting half the proceeds from whatever you both sell – including the Family Home. You are left with half (or thereabouts) and must start a new life on this amount. Think carefully before committing to selling the Family Home. It may be a better financial decision to buy-out your partner – or not depending on your own financial situation.
Is Your Partner buying out your share?
If your partner wants to keep the home, make sure you obtain an appraisal if you cannot agree on the value of the Family Home. Also, you may have to adjust to the fact that it is no longer your home and this may mean unfamiliar people living in it. obligations to your lender?
Your obligations to your lender
If you have been the party released from your mortgagee obligations, ask for the bank’s proof that they have discharged you from your obligations i.e. check you are no longer on the mortgage. This may need to be done after you have obtained Separation Agreement as some banks request to see this for obvious reasons before they take one partner’s name off the mortgage.
What are your other options if you cannot afford the mortgage yourself?
If your mortgage payments are almost paid off and you and your partner are on good or amicable terms then you could agree to continue to pay the mortgage until it ends. This is ideal and possibly not the option many can take. In this situation, it may still be untenable for your partner to stay living in the house while you both pay off the mortgage. In this case, the partner who is having their share bought out, will have to negotiate rent.
Can you substitute someone else on the mortgage?
It will be hard to sell the Family Home with negative equity. Unless you are able to negotiate other terms with your mortgage provider then you will both continue to be liable for the mortgage repayments. Potentially you could substitute your partner for other family members or friends who are interested or able to support you in the mortgage if you decide to keep the house. If you decide to go with this option, it is a good idea first to have already brought-out your partner.
What is the “Buy-Out”?
A Buy-out means you must identify the equity in the property – the difference between the mortgage balance and what the property is currently worth. It’s not always going to be an equal split when you separate from your partner. This may be the case if one partner’s family helped to improve the value of your home by providing money for renovations, or perhaps one of you contributed more to the deposit of the home.
How do you calculate the “Buy-Out” price?
But assuming that you both contributed equally to both the deposit on the home, and the recurring mortgage payments, this will be a simple calculation. To clarify, you take the current value of the property (note that you may both want to get property Valuers to obtain an accurate market value of the property), subtract the amount outstanding on the mortgage, and any other payments which were not contributions equally by you both, and then divide the remaining amount by two.
Example of Buy Out calculations
So, for example, if the property is now worth $500,000 and there is, say, $250,000 left to pay on the mortgage, you would need to find $125, 000 to buy out your ex-partner’s share of the property. If, for example, the property is worth $500,000 but $100,000 was provided as a loan by your parents to renovate the house or for the deposit, you will need to pay this back first. Say you have no mortgage on the house and you were to divide the sale of proceeds. This means you and your partner will be splitting $400,000 instead of $500,000. However, if you were to buy out your partner’s share, and there is still $250,000 left to pay on the mortgage, you will need to pay out the $100,000 first. Assuming the loan was a gift from your parents, this means that you will need $150,000 to buy your partner.
How to get a valuation on your Family Home or other properties
The Buy-Out Price above depends on the value of the home if you are keeping the Family Home. Note that your bank may also want you to get a valuation from a registered property valuer before they refinance the mortgage to you.
It is important to get a valuation from a certified registered valuer. This will determine the market worth of a house or property. A registered property valuer combines all their knowledge and experience with their observations and research undertaken of the property and its surrounding area, and determines the market value.
Cost of a valuation
A property valuation costs approximately $500 – $800 plus GST. However, a valuation does have a limitation period. This means it will remain “current” only for a limited time. This is normally anywhere between three to six months. Your ex-partner may agree to split the cost of the valuation.
Where to find a registered valuer?
Just by doing a Google search, we were able to find the following registered valuers:
Another good tool may be Property valuation, a website which allows you to find a registered property valuation near you. Note that there is also a Valuers Registration Board. You can go to them if you have a complaint or any questions such as the standing of the valuers you are going to. If you want to get the experts in, a registered property valuation can be done and costs from $500. If you do not want to spend this fee, there are other options and these are explored below.
How to work out a Family Home’ Market Value yourself
Real estate agents
You can ask Real Estate agents in your area who are experienced and acquainted with properties which are similar to yours. Perhaps ask for a few different estimates from local real estate agents and take the average of these. Just be aware that if these agents are only looking at comparable sales in your area, you will want to take into account differences such as location, exterior presentation, and conditions of the property and any changes in the CV values.
In comparison, a more objective estimate may come from the property’s Quotable Value (QV). QV has some great online resources there too. There are both free and paid options to purchase local sales reports which may include your property. Sometimes the rateable value (government valuation of the house) will be accurate as to market value but it cannot be relied on alone. You can find out rateable value information on your local council’s website for free.
Unless a combination of both of the above methods will give you a more accurate estimate of market value you can both rely on, you risk undervaluing or overvaluing the buy-out. In short, get as many assessments as you can possibly afford!
Get this written down in a Separation Agreement
Getting the above formalised in an agreement does not have to be expensive. At CODR, the cost of the Separation Agreement is $172.50. The cost of certification is proportionate and costs no more than a couple of thousand for both you and your partner. Most importantly, whatever you agree to do with the property, you both need independent legal advice. This protects all parties and stops one partner from lodging a caveat or notice of claim later on which can affect the freedom you have with the property. After that, it may also be helpful when it comes to applying for finance to show them this agreement as some lenders may be wary of unresolved relationship property issues.
Certificate of Title
Firstly, it is important to get a copy of the certificate of Title of your property to check whether your name is on it. Importantly, you will need to get your partner’s name off the Title to the property once they no longer have any interest in it. For instance, if you do not do this, your partner could put a registered interest against your property (a caveat). In other words, this is a notice that someone else has an interest in this property. This cannot be lifted unless by consent or by a hearing.
What if my name isn’t on the Title?
Meanwhile, if your name is not on the mortgage or deed of the house then that does not mean you have no rights or claims to the property. This means you should talk to a lawyer. If you have been living in the property or are in a de facto relationship with your partner, this means the Family Home may be relationship property – unless you have a prenuptial agreement or contracting out an agreement in place.
After the Buy-Out: Pay your partner’s Buy-Out Price
Above all, pay out your partner the buy out as you have agreed.
After the Buy-Out: Refinance the Mortgage
As a result of the Buy out, you will likely want to or may need to refinance the mortgage on your Family Home.
The cost of getting a Separation Agreement (or Contracting Out Agreement for that matter) is not expensive.
Certainly, it is less expensive than going to the Family Court for an order to divide up your relationship property.
If you are in a de facto relationship, you effectively have the option of an informal separation through getting a separation agreement which details how you will each divide your assets. This agreement needs to be certified by two independent lawyers.
After that, you may wish to register the separation agreement in the Family Court as a ‘consent order’ so that it becomes legally enforceable.
What if we are married?
But if you are in a marriage, you will need to get a divorce. This is done through an application which depends on whether you both agree to the divorce, or whether only one of you wants to get the divorce.
However, you will then also need a separation agreement detailing how you want to split your relationship property assets. Can’t agree on what is shared relationship property? See our article on what assets are usually deemed to be relationship property.
Above all, note that couples have a time of 12 months from when their marriage is dissolved by a court order to divide up their relationship property.
Variable legal cost of a Separation Agreement
The reason why there are differences in the costs of a separation agreement where you both choose separate lawyers is that this can turn into an adversarial process. Although your lawyer must be independent and act solely on your best interests, this should not be at the expense of an amicable separation where you and your partner have already agreed and decided on the process of splitting your relationship property assets.
The New Zealand law society has a guide on what you can expect to be charged for legal costs from our lawyer.
These costs can depend on the “importance and complexity of the matter, the nature of the work and how urgent it is, results achieved and the costs of running a practice, and any quote or estimate given, or fee agreement made at the outset”.
CODR does not have any disbursements as the entire process of certification is online.
Cost of the separation agreement (alone)
CODR enables you both to agree to terms which suit you and then to get this agreement drafted with the aid of an automation ‘bot’ via Autom.io. These bots ask you questions relating to your situation and puts the details you input into the agreement. You will then be able to download a Word document to edit if you have any changes to make on the final copy.
This takes out lawyers in the negotiation process which means it is both cheaper and perhaps a better way to preserve the relationship you have with your partner as no lawyers are involved to make the process tense.
However, if you were to get an agreement drafted by lawyers, there could be additional costs as each of your respective lawyers send the agreement back and forth with suggested edits or additions of clauses. CODR’s Separation Agreement only costs $172.50 online and this fee is payable directly on our website.
However, the cost of a legally binding Separation Agreement relates mainly to the certification costs of getting lawyers to independently provide advice as to signing the agreement.
After the cost of a separation agreement, is there a cost a ‘consent order’?
Yes. It currently costs $220 to the Family Court in order to make the agreement an enforceable order. If both of you entered into this willingly, it is likely to be made into a consent order.
However, it does note that you can ask the Court to You can ask the Court to cancel the fee and will usually be waivered where applicants qualify for legal aid. It is unclear whether the Court would also waiver the fee if you are a higher net-worth individual.
Furthermore, the benefits of going further to get a consent order after you have completed certification of the separation agreement is that it becomes enforceable by the court and if one of you doesn’t do what was agreed in the Separation Agreement, the Family Court can make the person pay a bond or compensation.
On the justice website, it notes that “if the person still doesn’t follow the Order, then they may get charged with a crime and could be fined or jailed.” Moreover, this can add greater protection to you than just getting the Separation Agreement on its own.
Although this is legally valid and binding, the other party not complying may mean that you are left out of pocket to try to enforce this through the Family Court or mediation. Therefore, if you have a doubt as to whether your partner will follow through with the separation agreement terms, get a consent order!
A comparison of costs when you must mediate
In the event in which you cannot get a separation agreement, because you and your partner or spouse disagree on the terms of the separation agreement, there is also the option of going to mediation. Note that this is different to a Family Disputes Resolution, which is a process that is Court-mandated if you choose to go to the Family Court.
Mediation is an option for couples who have separated but cannot agree as to their terms. The following is an example of one of the disputes we have dealt with at CODR, and a comparison of the likely court costs in a similar case:
30-50k per party
95 working days
Approx. 24 months
Less than $10,000.00
While this is not was not in regard to a separation and relationship property issue, this does show that CODR’s online process can help to expediate getting a finalized and binding separation agreement.
Cost of a Separation Agreement with CODR?
It’s a fact of life that every couple and their agreement is going to be different. However, CODR strives to provide our clients with a fixed fee. This does mean that we need to estimate and negotiate any fixed fees with our lawyer’s prior certification. We price this based on our experience of the complexity (on a sliding scale from standard to complex) of your situation and agreement terms. For standard certifications where couples have one stand-alone Family Home which are splitting the sale of proceeds from, we usually charge $1500 plus GST.
However, this does not include situations where couples have complex arrangements dealing with the Family Home, or if couples have multiple properties or trusts, or business shares. There is a myriad of situations in which CODR’s standard agreement does not take into account. Therefore, a good indication that your situation is more complex than our standard situations will be whether you have needed to edit or add in clauses to your Separation Agreement.
This increases the costs of certification as our lawyers bill us for the time in which it takes them to prepare and then to conduct the certification – taking into account the legal advice they must give as part of the process. More complex assets or situations does mean more time needed in order to provide advice and to satisfactorily certify your separation agreement.
What can I expect to pay?
Most of our more complicated certifications for the Separation Agreement vary between $1500 – $2500 + GST, as an indication.
However, if for any reason your certification does not occur (one partner changes their mind last minute, or our lawyers advise the party not to sign as the terms are manifestly unfair), then CODR refunds the parties the fee paid less any costs already and reasonably incurred by our lawyers in preparing for and conducting the certification.
Can I get competing quotes from our own lawyers?
Yes. CODR does not have the exclusive right to certify your agreement and any party can use their own lawyers to certify. In other words, we think we provide a transparent fee and process in certifying.
Are there any on-going costs after separation?
You may need to get conveyancing or trust lawyers involved at this stage to deal with the execution of the terms of the separation agreement. For instance, you may need to change the name of the title on the property to one spouse, or you may need to get Deeds of Settlement drafted up if you have independent trustees which deal with your relationship property.
However, there are on-going costs that may arise out of your separation. For example, if you have children, you may have already detailed in your agreement how you will each contribute to child-care. In particular, child support becomes a topic of on-going costs.
Aside from child support, if your separation agreement deals with on-going maintenance where one party continues to support the other, these may also be the on-going costs involved. This could be in addition to any child support payable. It is also open to a spouse to apply to the Family Court for maintenance on top of child support so it is best to discuss this issue when you are getting the agreement.
What to do with your finances after you have separated
Sorted.org.nz have a guide on separation. This details a good step-by-step guide as to what you need to do in order to get your finances in order including:
Set up new bank account
Check your Credit Record and any debts are paid.
Update any rental agreements
Work out your net worth
Create a new budget after adjusting to a change in income
In addition, it is important that if you have any joint debts that you might want to ensure your name is not on these after you have paid off your share (or whatever the case may be).
Similarly, before signing onto a new lease, to take your name off a shared lease, else you could be jointly liable for your partner’s debts or if anything goes wrong on this rental property.
Does CODR accept Legal Aid applicants?
Unfortunately, CODR does not currently provide legal aid services for separation agreements or certifications for couples which fall within the legal aid system. However, it may be in your best interest to head to a local Community Law Centre. They are likely to have a directory of services or lawyers who are skilled in this area to help. They detail whether they can provide services to you here and if you are eligible, they will direct you to the right Legal Aid lawyer.
Another useful resource is the Citizens Advice Bureau which answers some questions relating to separations and divorces here. In short, although the cost of a separation agreement is never fixed, this article may be a definitive guide on what costs you should expect when separating.
When you separate, your relationship property assets are equally divided.
This is in the Property (Relationships) Act 1976 (“The Act”). To familiarise yourself with the fundamentals of the Act, refer to our article here
S 11 of the Act states that each spouse is entitled to equal shares in the:
Family Chattels (e.g. furniture, boat, and dog)
And any other classified relationship property
The above would apply if you have no contracting out or separation agreement. However, there are exemptions to the equal division assumption, such as:
Extraordinary circumstances that make equal sharing “repugnant to justice”;
A short marriage;
A short de facto relationship;
Economic disparity between the spouse after separation;
Two homes that qualify as the family home;
One spouse sustained or diminished the value of another spouse’s separate property; and
One spouse satisfied personal debts out of relationship property.
The Courts may find that equal sharing would create extreme injustice.
In cases like these, the courts will divide relationship property according to the contributions made by each spouse.
Here are some examples of extraordinary circumstances that are “repugnant to justice”:
Wife financially and emotionally supported the family and the husband was an alcoholic;
Wife financially supported and provided everything in the marriage, took care of the child and provided the funds for her husband for further studies. His earning capacity was greatly enhanced during this relationship as she was more established.
Factors that courts will consider when assessing exceptions
Was there a gross disparity of contributions during the relationship
The length of the relationship. The general rule is, the longer the relationship has been the more intermingled property becomes
Was there any negative contribution such as one spouse acting in fraud, deceit or forgery towards their spouse.
Gross misconduct of a spouse. This could include someone who is very abusive and they damaged the property in question
Factors courts will not consider
The circumstances after the spouses cease to live together. For example, if one spouse after separation assumes the responsibility of maintaining the house and paying for its outgoings. Or if one spouse deserts the family and fails to maintain for them
If one party owns the family home, this is not “extraordinary”.
Marriages of short duration
This is when spouses have lived together for less than three years. The division of property would be to each spouse’s contributions to the marriage if the assets were:
Wholly owned or substantially by one partner; or
Assets owned by one spouse through succession, survivorship, as a beneficiary, or as a gift; or
One spouse contributed to the marriage disproportionately than the other.
Any other property or assets that fall outside of the above will be dealt with by the equal division rule.
De Facto Relationships of Short Duration
If there has been a de facto relationship of short duration where the de facto partners have lived together for less than three years or the court deems it to be a de facto relationship of short duration, then the Act will not apply. The exception to this would be if:
There is a child in the de facto relationship
One spouse has made a significant contribution to the de facto relationship
Each share will be determined according to individual contributions.
This section applies if the courts decide:
After the relationship ends, the income of one spouse is likely to be higher; or
One spouse was better off due to their role during the relationship.
Factors that courts may have regard to when drawing this conclusion:
The likely earning capacity of each spouse
The responsibilities of each spouse for the ongoing care of children
Projected earnings of one spouse if they had scarified a career for the relationship
The enhanced earning capacity of one spouse because of their respective roles in the relationship
The age of each spouse
Two homes at the date when marriage or de facto relationship began
This applies during a relationship when each spouse owns a home that could be the family home. The courts will adjust the shares to relationship property to compensate for the inclusion of the home of only 1 spouse. This resolves any injustice that may have resulted.
As a result, this section is usually relevant for second marriages or ones that occur later in life where each spouse may own thier own house.
Sustained or diminished value of separate property
Sustenance is when one spouse’s property has been maintained by relationship property.
Large amounts of cases under this exception are related to farms. An example is where one spouse owns a farm that is separate property, but the non-owning spouse maintains the farm.
A Court will award compensation or displace equal sharing for this. But calculations in the past for this has been quite conservative.
Diminution is where separate property has been “materially diminished” in value by the one spouse’s actions. Courts may decide to diminish the shares of the other spouse as compensation.
Personal Debt satisfied out of Relationship Property
If one spouse satisfies their debts from the relationship property, the other may be compensated either by:
A greater share in relationship property; or
Some of the other spouse’s separate property is treated as relationship property; or
An order for one spouse to pay the other.
Talk to one of the CODR team today to see whether your situation fits one of the above.
What are trusts and how do they apply to relationship property?
Firstly, even if you established the Trust, but your partner contributed to the assets, the Trust will not necessarily be separate property. This is true even if a third party established the Trust.
To clarify, this means that Trusts are not an absolute protection against relationship property. This will be determined using the standard test in relationship property laws.
Certainly a partner will have no interest in a trust unless you are a beneficiary of the trust or the trustees have given you a legal interest in the trust.
In other words, if you and or your partner have a vested or contingent interest in a trust, that interest will be sufficient to qualify as property under relationship property laws.
Relationship property laws make provision for some possible claims by the non-owning partner against these interests. So even if a distribution is classified as being your separate property, this may not necessarily protect you from claims.
If you are unsure whether you or your partner has a legal interest in the trust, talk to a lawyer. Alternatively, contact CODR and we may be able to help.
How does the current law deal with trusts?
At the moment, it is clear that simply owning assets in a trust is not an absolute bar from claims. However, if a trust is involved the Family Court has limited jurisdiction, and can refer matters to the High Court. But this can be an expensive and time-consuming process.
The law expressly allows for the trust-owned house to be included in some situations, such as:
If the house was transferred to the trust when the couple were in a relationship;
Even if the property was already in a family trust before the relationship commenced, if a loan is secured over the property and a partner made repayments;
If one party contributed to the “improvement” of the home, then they may have an ability to claim against the trust.
In addition, there may be other situations in which a Trust does not separate your property from relationship property.
What is changing?
In 2019, the Law Commission will suggest reforms
to the relationship property laws in New Zealand which have not changed for
over 40 years. In terms of trust, this may include allowing the Court to have
wider powers with regard to the sharing of trust property.
Therefore, before entering into a relationship, entering into a relationship property agreement recording the manner in which you seek to have your property divided in the event of separation, will be important.
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 property
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, more 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.