Relationships can end despite the best intentions. A difficult separation can often pull children into legal battles and end up in Court arguing over assets. Understanding the process of separation and property division is an essential first step to avoiding a lengthy process.
A separation and property division agreement may be the solution to keep you out of Court and in control throughout this challenging time.
Understanding the Law
The Property (Relationships) Act 1976 (the Act) determines how couples in New Zealand will divide their property when a relationship breaks down.
The Act intends to recognise contributions from each partner in the relationship, both financial and non-financial, to provide each party with a fair division of their property when the relationship ends.
The Act defines the general rule for the division of relationship property which is that in the event of separation all relationship property is to be divided equally. There are, however, exceptions to this rule.
The General Rule
A ‘qualifying relationship’ is based on the type of relationship you and your ex-partner were in and how long you were together.
These relationships include:
- married couples
- civil union couples
- de facto couples, who have been in a relationship of that nature for at least three years
The equal-sharing rule covers any couple in one of these types of relationships who have been together for at least three years (although there are some exceptions to the general rule).
The start date of a de facto relationship, or whether such a relationship exists at all, can be difficult to determine. See our article – What is a De Facto Relationship? for further information.
In some limited circumstances, the Act can apply to short-term relationships (less than three years). It is best to seek early pre-separation advice if you are concerned about how the Act may or may not apply to your relationship.
If you don’t want these general rules to apply to your situation, you can contract out of relationship property laws. This is achieved by entering into a Contracting Out Agreement (also known as a “prenup” or “pre-nuptial agreement”).
What is relationship property?
‘Relationship property’ includes the family home (the primary residence that the couple lives in) “whenever acquired”. Similarly, all family chattels are relationship property, whenever acquired. These can include household furniture, appliances, items of household or family use, motor vehicles, caravans, trailers, boats and household pets. Whenever acquired means it does not matter if one party owned the family home or family chattels before the relationship; once you’ve been in a qualifying relationship for three years or more, those assets will be relationship property.
Other assets are dealt with differently and need to be attributable to the relationship. These generally include all income earned during the relationship, property acquired during the relationship (or in contemplation of), the proportion of any superannuation or KiwiSaver policy attributable to the relationship, bank accounts and any property acquired for the common use or common benefit of the relationship. Debts, even if in one party’s name, may also be relationship property.
Some property will remain separate, but there are many circumstances in which a partner may gain an interest in a separate property asset or the increase in the value of that asset. For example, one partner may accumulate an interest in a business owned by the other before the relationship.
Separation and Property Division Agreement
Every relationship is different, which means reaching an agreement on dealing with property following separation will depend on the circumstances and the nature of the property you have to divide.
A Separation and Property Division Agreement, often known as a settlement agreement, is the written agreement between both parties that sets out who gets to keep what following their separation. Documenting the division of property in an agreement of this nature, is usually the last step in the property division process, following full disclosure of all assets and liabilities, and negotiations as to division of property.
Depending on the dynamics of the relationship and the complexity of property available for division, some couples can reach an agreement without the assistance of a lawyer.
If following an amicable separation, the parties have reached an oral or written agreement themselves, it is still essential that you enter into a formal separation and property division agreement to provide certainty for you moving forward.
Unless the agreement reached regarding property division complies with the following requirements, it is not binding:
- The Agreement must be in writing and signed by both parties;
- Each party must have independent legal advice before signing the Agreement;
- A lawyer must witness each party’s signature; and
- The lawyer who witnesses the signature of a party must certify that they have advised as to the effects and implications of the Agreement.
Without a formalised agreement, there is little stopping one party from going back on their decisions down the track and arguing that what they received was not in line with their legal entitlement and, therefore, not just. Or they could suggest there was not full disclosure of all assets and liabilities, so they want a piece of what was not disclosed. This means assets one person may have acquired following separation may not be protected from further division.
We recommend all assets and liabilities owned by a couple in their joint names, in their sole names or that they have an interest in, are included in the Agreement. An agreement could include property that may be classified as separate property as well as interests in trust property.
FOR MORE INFORMATION
It is essential when you separate that you get early advice as there are time limits for applying to the Court to resolve relationship property matters if an agreement cannot be reached.
Find more information here: