Separation and property division

by Maretta Twentyman & Debbie Dunbar - Morrison Kent

The general rule in New Zealand is that once you have been in a ‘qualifying relationship’ for three years or more, in the event of separation all ‘relationship property’ is to be divided equally.
A ‘qualifying relationship’ is a marriage, civil union or de facto relationship (or any combination of those). The start date of a de facto relationship, or whether such a relationship exists at all, can be difficult to determine.
‘Relationship property’ includes the family home (the main residence that the couple live in) “whenever acquired”. Similarly, all family chattels are relationship property, whenever acquired. These can include household furniture, appliances, articles 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 prior to 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 Kiwsaver 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 items will remain separate but there are many circumstances in which a partner may gain an interest in a separate property asset or in the increase in value of that asset. For example, one partner may accumulate an interest in a business that was owned by the other prior to the relationship.
If you don’t want these general rules to apply to your situation, you can contract out of relationship property laws. This is done by entering into a Contracting Out Agreement (also known as a “pre-nup” or “pre-nuptial agreement”). An agreement of this nature can deal with one asset in particular, such as the family home, or a whole range of assets. It usually sets out who owns each asset and how the couple want them dealt with in the event they separate or die.
Any agreement of this nature has formal procedural requirements that must be complied with and they are as follows:

  1. The agreement must be in writing and signed by both parties;
  2. Each party must have independent legal advice before signing the agreement;
  3. Each party’s signature must be witnessed by a lawyer; and
  4. The lawyer who witnesses the signature of a party must certify that they have advised as to the effect and implications of the agreement.

A separated couple should also enter into a relationship property agreement in order to ensure their agreement as to division of their property is binding and achieves full and final settlement between them. Separation agreements (also known as settlement agreements) must also comply with the formal requirements set out above.

** It should be noted there are a number of exceptions to the general rule which may result in division of relationship property being unequal. Expert advice should be sought in any separation situation or when considering contracting out of the Property (Relationships) Act. 

If you would like any further information or advice please contact either of the article authors: Maretta Twentyman or Debbie Dunbar, or the Morrison Kent Wellington office (04) 472-0020.  

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