Relationship Property

Couples facing separation mostly understand that in New Zealand the law generally provides for an equal division of their relationship assets. But that’s about it for most people unless they have done their own research or had an opportunity to speak to friends or family who have been through the process or otherwise have some understanding of the law.  

However, the division of property on separation is not always so straight forward and nor is it the case that on separation all assets will be divided equally. Every case is different and must be assessed on its own unique facts. 

Following are some of typical questions I am asked frequently by new and existing clients: 

How are assets divided when couples separate? 

On the breakdown of a qualifying relationship, all property acquired during or in anticipation of that relationship will generally be divided equally. The exception is property that was owned prior to the relationship and or was acquired by way of gift or inheritance during the relationship which has not been intermingled or used for the shared benefit of the couple and their children, if any ( separate property).  

A qualifying relationship is one that is not of short duration, that is less than 3 years. If separation occurs within 3 years, then the division of asset will be largely based upon contributions made.  

Under our law the family home and chattels are given a special status, when ever acquired. If for example a home is owned by one partner prior to the date of the relationship ( separate property) but becomes the family home, then, provided the relationship is not one of short duration, the home will become relationship property by virtue of its use.  

It is instructive to note that in its 2019 review of the Property (Relationships) Act 1976, the Law Commission recommended sweeping changes to the presumptive equal sharing provisions of the law, including those relating to the family home. Specifically, the Commission considered that where a home is brought into a relationship  or is acquired through gifting or inheritance during the relationship ( separate property) but becomes the family home by virtue of its use ( relationship property) then its value at the commencement of the relationship should be preserved as separate property and only that portion of the value at separation that is/was of the relationship, should be shared as relationship property. 

What constitutes separate property at separation? 

As mentioned earlier, separate property is essentially all property that is not of the relationship. It may have been acquired before the relationship and ringfenced from it in all respects. Or it may be received during the relationship by gift or inheritance or as a beneficiary under a trust.  

Provided separate property is not used for the benefit of the relationship or otherwise intermingled with relationship property, its separate status will be preserved. Take for example the inheritance of money: if that is placed in a separate account or used to acquire property that is not used for the benefit of the relationship then it will be recognized as separate. But if the money is used to improve the family home or to purchase a beach home that is then used by the family during the relationship, then the separate status of the money and/or property bought with it, is likely to be lost. 

What property is excluded from consideration on separation?

There is a distinction to be drawn here between what must be disclosed and what might be shared. Disclosure can be problematic. Many hours at great cost can be taken up pursuing information if one party is minded not to disclose because he/she considers his/her former partner is not entitled to share. But that is not the test and common-sense dictates that before the status of property can be properly classified as being separate or relationship, there needs to be full and frank disclosure. This is likely to include bank accounts, annual financial statements, trust deeds, resolutions etc. etc. So always the first task is to gather all relevant information to assess the pool (and value) of the relationship pool of assets. Once the first task is done, an assessment of clear and probable claims should generally follow quickly.  

The clear and irrefutable claims will typically be in respect of the family home and chattels (including motor vehicles, boats) jointly held accounts, shares and interests in a business established during a relationship.  

The probable claims will be in respect of Trusts or other third-party entities into which relationship property has been disposed and or the efforts of one of both parties to the relationship (or assets of the relationship) has been used to sustain or improve those entities. 

The property that can be ruled out altogether as being separate would be of the nature referred to earlier in the piece, and or beneficial interest in a family trust(s) which is unrelated to the relationship altogether.

What are one’s rights on separation? 

The most fundamental right is that of independent legal advice following a process of full and frank disclosure. Some people will resolve matters quickly by agreement while others will war for years through the courts. But if a pragmatic and cost-effective approach is taken at the outset to the gathering and sharing of all relevant information then there is no reason why matters cannot be settled quickly. 

The law requires that an agreement will not be valid unless it is in writing, signed by each party in the presence of an independent lawyer who must also certify that he/she has advised his/her client as to the effects and implications of the agreement. It follows that before that certificate can be given each lawyer must have full disclosure.  

If a couple cannot agree, either is free to file an application in the Family Court to resolve their differences. That application may be filed as of right at any time after separation and up to 12 months following divorce. But after that, permission (leave) of the court must be sought before an application will be considered. This underscores the underlying objective of the law for couples to achieve a clean break within a reasonable period of time.