Separating from a partner is difficult enough without also having to work out who gets what.

In New Zealand, the division of property when a relationship ends is governed by the Property (Relationships) Act 1976. This article gives a general overview of how the Act works. Every relationship is different, and the way the Act applies to your particular circumstances will depend on your specific facts, so this should not be read as a substitute for tailored legal advice.

Which relationships does the Act cover?

The Property (Relationships) Act applies to three types of relationships:

• Marriages
• Civil unions
• De facto relationships that have lasted three years or more

A de facto relationship of shorter duration may still qualify in limited circumstances, for example where there is a child of the relationship or one partner has made a substantial contribution to the relationship. Whether a particular relationship meets the legal definition of a de facto relationship is often the first, and sometimes the most contested, question in a property dispute.

Relationship property versus separate property

The Act draws a distinction between relationship property and separate property.

Relationship property generally includes the family home and family chattels (regardless of when they were acquired or whose name they are in), property acquired by either partner during the relationship, and property acquired in contemplation of the relationship.

Separate property generally includes property acquired before the relationship began, and property received by one partner alone during the relationship as an inheritance or gift from a third party, provided it has been kept separate and not intermingled with relationship property.

The line between the two categories is not always straightforward. Separate property can lose its separate character if it is mixed with relationship property, used for the common benefit of the relationship, or if relationship funds or effort are used to maintain or improve it. The family home is treated as relationship property even if one partner owned it before the relationship began, which often comes as a surprise to people who assume that what they brought into the relationship remains automatically theirs.

The general rule: equal sharing

The starting point under the Act is that relationship property is divided equally between the partners, regardless of which partner earned more, whose name is on the title, or who contributed what financially. This reflects the idea that both partners contribute to a relationship, whether through paid employment, homemaking, raising children, or supporting the other partner’s career, and that these contributions are treated as being of equal value.

There are, however, circumstances in which the courts can depart from equal sharing. These include situations involving economic disparity between the partners following separation, relationships of short duration, and cases involving extraordinary circumstances that would make equal sharing repugnant to justice. These exceptions are applied narrowly, and whether one might apply to a given situation requires careful legal assessment.

Contracting out agreements

Partners can agree, before or during a relationship, to opt out of the Act’s default provisions and set their own terms for how property will be divided if the relationship ends. These are commonly known as contracting out agreements or, colloquially, prenuptial or relationship property agreements.

For such an agreement to be valid, each partner must receive independent legal advice, and the agreement must be in writing and properly witnessed. Courts can set aside a contracting out agreement in certain circumstances, including where giving effect to it would cause serious injustice. A well-drafted agreement, entered into with proper advice on both sides, is far less likely to be successfully challenged later.

Complicating factors

A number of issues commonly complicate what might otherwise seem like a straightforward division, including:

• Trusts, including family trusts established before or during the relationship
• Businesses and companies, particularly where one partner has an ownership interest
• Inheritances and gifts that have been mixed with relationship funds or property
• Increases in the value of separate property during the relationship
• Superannuation schemes and other retirement savings
• Debts and liabilities, which are generally shared in the same way as assets
• Property held overseas

Each of these areas has its own body of case law and can significantly affect the overall outcome of a property division.

How property is actually divided

Where partners can agree on a division of property, that agreement can be formalised and does not require court involvement. Where agreement cannot be reached, either partner may apply to the Family Court for a determination. The court process can involve valuation of assets, disclosure of financial information by both partners, and, in some cases, a defended hearing.

Time limits apply to bringing a claim under the Act, so it is important not to delay in seeking advice after separation.

Seek legal advice early

This article is intended only as a general introduction to a complex area of law. The Property (Relationships) Act contains numerous exceptions, presumptions, and technical rules that can significantly change how it applies to any individual situation, and the outcome in any particular case depends heavily on its specific facts.

If you are separating, considering entering into a relationship, or facing a property dispute, you should obtain legal advice specific to your circumstances as early as possible. Early advice can help you understand your position, avoid costly mistakes, and, where possible, resolve matters without the expense and stress of litigation.

If you would like to discuss your situation, please get in touch to arrange a consultation.