The Property (Relationships) Act 1976 (“the Act”) classifies property as either:
- Relationship Property – being the property of both partners which is generally divided 50/50 in the event of the separation, provided there are no issues of economic disparity, post separation contributions etc.; and
- Separate Property – being the property of one party that is not relationship property.
Generally, the equal sharing provisions of the Act apply once a couple has been in a de facto relationship for three years (including any period during a marriage or civil union).
Whether a relationship is a de facto relationship depends on the individual circumstances. A de facto relationship is defined as a relationship between two persons who live together but are not married or in a civil union and live together as a couple.
Once a couple has been in a de facto relationship for 3 years then the equal sharing provisions of the Act generally apply to relationship property so that your bank accounts, chattels, the proportion of KiwiSaver earned during the relationship, and in particular the family home is classified as relationship property.
This has particular significance if one partner purchased a property before entering into the relationship. If during the course of the relationship, the other partner moved into the property purchased by their partner, the couple had been together for 3 years and then separate, then the partner that moved into the property is entitled under the Act to a half share in the property. This applies even if they made no contributions to the property outgoings, renovations or upkeep of the property.
A way to avoid this is by entering into a contracting out agreement (sometimes referred to as a prenup). This is where both parties can agree that the equal sharing provisions of the Act do not apply to each of their property and in the event of separation or death their assets are to be divided as recorded in the Agreement.
For example, rather than the family home being treated as relationship property (to be divided 50/50), it can either be kept as one party’s separate property or divided in proportions as they agree.
By way of example, Barry owns a property in his sole name and he meets Bernice. They enter into a relationship. After one year of dating, Bernice moves into Barry’s house. Barry and Bernice decide that as the house is Barry’s, she will not contribute to any of the outgoings, rates or renovations for the property. Unless Barry and Bernice enter into a contracting out agreement, if they separate after being together for three or more years, then Bernice is entitled to bring a relationship property claim for half the house.
Similarly, unless Barry and Bernice enter into a contracting out agreement, any income, Kiwisaver contributions, shares and investments and family chattels or other assets are deemed relationship property and either Barry or Bernice can make a relationship property claim for half of these assets.