Relationship Property

What is the Property (Relationships) Act 1976?

The Property (Relationships) Act (PRA) is the New Zealand statute which sets out the law under which property owned by couples is divided when they divorce. For information about how the PRA applies when one partner dies see relationship property and death. The PRA also sets out options for how parties can divide their property by agreement before, during and after their relationship ends.

What relationships does the Property (Relationships) Act 1976 apply to?

The PRA applies to you and your partner if you are a:

  • married or civil union couple
  • couple in a de facto relationship for at least 3 years
  • couple in a de facto relationship for less than 3 years, who have a child and not making an order under the PRA would cause serious injustice in which case your shares are divided in accordance with your contributions to the relationship
  • couple in a de facto relationship for less than 3 years where one partner has made substantial contributions to the relationship, and not making an order under the PRA would cause serious injustice in which case your shares are divided in accordance with your contributions to the relationship.
What is relationship property?

Property which you and or your partner own is either relationship property or separate property depending upon the how the property is classified under the PRA. Under the PRA relationship property is divided equally.

The family home and family chattels are always relationship property no matter whose name they are in or how they were acquired.

Other assets will usually be relationship property if the circumstances in which the asset was bought, used, created or otherwise mixed up with other relationship property means that both partners have a common association with the property. That means that, in addition to the family home and chattels, relationship property usually includes things like:

  • income earned during the relationship
  • property owned jointly or in equal shares by the partners
  • property bought or created by either partner during the relationship
  • the value of life insurance, KiwiSaver and superannuation which was paid for during the relationship
  • property bought with the proceeds of separate property provided it was bought for common use or benefit
  • gifts or inheritances which are intermingled with other relationship property. For example, an inheritance which was paid into a joint bank account along with other income and used for living expenses
  • increases in the value of relationship property, income from it, or money from the sale of relationship property.

For answers to questions including who gets the dog click here.

What is separate property?

If it’s not classified as relationship property under the PRA the property is separate property. Ownership of separate property stays with the partner who owns it unlike relationship property which is divided equally. Separate property includes things like:

  • property bought with the proceeds of sale of property owned by either partner before the relationship began provided the property was not required for common use or benefit
  • family heirlooms or taonga
  • gifts and inherited property which a partner receives during the relationship
  • property bought with inherited property received by one partner during the relationship provided the property was not so

For examples of situations where separate property becomes relationship property including where inherited property is involved click here.

What about increases in value of separate property during the relationship?

Increases in value and income from separate property can potentially become relationship property where the increase in value is attributable to the application of relationship property the efforts of the non-owning partner.

For examples of situations where increases in value of property get shared and don’t get shared click here.

 

When the PRA talks about ‘contributions to the relationship’ what is it referring to?

The PRA provides for relationship property to be divided according to the contributions of the partners to the relationship instead of on a 50/50 equal sharing basis in a number of situations. These include where there are extraordinary circumstances or the relationship lasts for less than three years and there is a child of the relationship or the applicant has made a substantial contribution to the relationship, and the Court is satisfied that it would be unjust not to make an order under the PRA.

If property is divided according to the contributions of the partners to the relationship, both financial and non-financial contributions are taken into account including:

  • caring for children or elderly relatives
  • managing the household so that a partner can concentrate on building a business
  • working to increase the value of property
  • giving up a higher standard of living
  • working outside the home so that a partner can gain qualifications.

All forms of contribution are given equal worth and are considered globally. That means that it doesn’t matter whether any particular form of contribution happens to produce or create an item of property.

How are debts divided?

Under the PRA debts are classified as either relationship debts or personal (separate) debts in the same way that property is either relationship property or separate property. Some debts (eg a bank overdraft or student loans) may be partly a relationship debt and partly a personal debt. The responsibility for relationship debts is shared but personal debts remain the responsibility of the partner who incurred them.

Examples of relationship debts are:

  • the amount owing on finance plan agreements for the family cars
  • bank loans for a business that benefits both parties
  • home loans
  • credit card debt for usual day-to-day family purchases, groceries, holidays and

school fees.

Personal debts are those incurred to acquire or improve separate property or those incurred before the relationship began or after it ended. Even though a debt may be in one partner’s name only (say on one partner’s credit card), that doesn’t mean it’s a personal debt – it will depend on the purpose for which it was incurred.

Under the PRA one partner can be entitled to receive compensation where the relationship property pool has been reduced because relationship property has been used to pay a personal debt of the other partner during the relationship.

My partner and I have separated. How do we go about dividing our relationship property?

The good news is that in the vast majority of separations, partners are able to reach agreement on how their property should be divided. If you and your partner have agreed about how your property should be divided a relationship property lawyer will be able to draft a binding agreement under the PRA for you both to sign. In order to be binding you and your partner will need to each receive independent advice from a relationship property lawyer who will certify that you have had the law explained to you and that you understand the terms of the agreement.

My partner and I have separated but we can’t reach agreement about how our property should be divided. What are my options?

If you can’t agree about how your property should be divided it’s time to see a relationship property lawyer. That may not sound like good news but good relationship property lawyers (and there are plenty of them out there) should be focused on ensuring that:

  • you receive sound, realistic advice including correctly identifying and providing solutions to thorny problems; and
  • their costs are in line with the benefits they can achieve for you.

Hiring a relationship property lawyer doesn’t automatically mean you’re going to Court. In the vast majority of relationship property disputes where a relationship property lawyer is involved the disputes are settled by agreement without the involvement of the Court.

My partner and I have separated but my partner is stonewalling and won’t respond to my relationship property lawyer’s letters. What should I do?

This situation is difficult but not uncommon. This is usually the right time to have your relationship property lawyer issue a proceeding in the Family Court. It’s often a false economy for your relationship property lawyer to keep sending letters, and for you to keep sending emails and texts. The wheels of justice turn slowly meaning that Family Court proceedings take time to wend their way through the system. Therefore, getting proceedings underway early often provides a useful backdrop against which continued attempts at negotiation can be made while steadily increasing the opportunity for the Court to decide the dispute if no agreement can be reached.

If Court proceedings are issued know that the vast majority of relationship property Court proceedings settle without going to a full hearing.

For further information about relationship property see my articles on relationship property and trusts and departures from equal sharing where during the relationship one partner stays at home to look after the kids.

Divorce disputes often bring from the shadows to the light issues around family violence. Family violence isn’t limited to physical violence. It includes financial or economic abuse including by denying or limiting access to money. For further information about family violence and obtaining protection and property orders click here.

Alex McDonald, Relationship Property Barrister, Auckland

“I could not recommend Alex highly enough. Her communication and negotiation skills are second to none and her ability to navigate complex and tricky characters effortlessly is nothing other than outstanding. Working with Alex made what could have been a very difficult process bearable and I always felt I was in the best of hands.”

ADH, Auckland