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.
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 relevant dates of the relationship (when you were married or started living together, when you separated);
What will happen with the family home and any mortgage on it;
What will happen with the chattels, furniture;
Any bank accounts and what is to happen with those;
Motor vehicles and who gets what;
Kiwisaver and superannuation;
Debts – who is liable for those;
Any adjustments to be made or adjustment payments to make;
Administrative clauses, such as the requirement to make complete disclosure and to execute any necessary documents;
That each party has taken independent legal advice on the implications and effects of the Agreement;
Costs – normally each party pays their own costs and shares the cost of the agreement and certification; and
Witnessing by Audio-Visual communication (agreeing that this is effective).
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 a separation agreement and 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.