Finding Resolution for a New Beginning

When couples face the challenges of separation and divorce, the Property (Relationships) Act 1976 (“the Act”) provides an important framework for establishing a fair and binding (enforceable at law) separation agreement with respect to your property – your assets and liabilities.  There is also another law that sets out proper processes and ensures fairness where children are involved.

Legal advice is necessary in order to form a binding relationship property agreement; and to ensure that you are fully informed about your rights, obligations, and entitlements regarding property division. If the requirements for a binding Agreement under the Act aren’t followed, this may mean a separation agreement is unenforceable.  Our job is to help you navigate the complexities of separation and divorce with confidence.  We can ensure your agreement complies with the law and provides the necessary protections for you.

We recommend you contact our Mactodd team at an early stage if you are going through a divorce or separation.

The Property (Relationships) Act (“the PRA”) applies to:

• married couples;

• couples who have had a civil union; or

• de facto couples, and whose relationship has endured for more than 3 years.

It provides the regime for classifying and dividing property at the end of the couple’s relationship, whether through separation or death. It automatically governs the property rights between the parties to a relationship UNLESS they have contracted out of the PRA. The PRA establishes an “opt out” regime.

Unless the parties have “opted out”, on separation their relationship property is divided equally. That sort of outcome may be less than desirable for some couples. Particularly for those who have had prior relationships and wish to protect assets for themselves or their children, it is important to “opt out”.

Section 21 of the PRA gives couples, as well as intending couples, the right to make any agreement they wish for the purpose of opting out of the PRA with respect to the status, ownership and division of their property whether it is existing property or future property. Couples opt out by entering into a section 21 contracting out agreement. An agreement can classify property and how spouses and partners will settle any property disputes between themselves. Importantly, the contracting out regime cannot be used to defeat the rights of creditors.

An agreement may deal with all of a couple’s property or it may deal with specific items.

One of the things that can be included in a contracting out agreement is whether the couple will be bound by the terms of each other’s Wills, or whether they may challenge those Wills when one of them dies.

Form and Requirements

While a contracting out agreement does not need to be in any particular form, it must comply with certain procedural requirements. If these requirements are not complied with then the agreement may be set aside. Those requirements are:

• The agreement must be in writing and signed by both parties;

• Each party to the agreement must have independent legal advice before signing the agreement;

• The signature of each party to the agreement must be witnessed by a lawyer; and

• The lawyer who witnesses the signature of the party must certify that, before the party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.

Independent legal advice must be truly that. Lawyers must be from different firms. The advice must be quality advice. The Courts have described this advice as requiring an explanation of the agreement AND advice on the assessment of a party’s entitlement under the PRA, AND the implications of the terms of the agreement must be explained as well.

Setting aside an agreement for serious injustice

In 2002, Parliament amended the PRA and increased the stringency of the test that the Courts are to apply when considering whether a contracting out agreement should be set aside. Previously, the test was that enforcement of an agreement would cause injustice. Now, the test is one of serious injustice. That is a high threshold to meet.

It is important that the terms of an agreement are revisited over time. It is impossible to anticipate every event that might occur and change circumstances and it may be that over time the terms of an agreement need to be addressed.

Mactodd can help you with your relationship property queries or any other matters relating to Family Law.

Spousal Maintenance – balancing financial equity

Spousal maintenance involves financial support from one partner or spouse to another following the dissolution of a relationship.  In determining any court application for spousal maintenance, the court examines a number of factors such as the relationship’s duration, each party’s financial resources, any children of the relationship that need to be cared for, and future financial needs.

The objective of spousal maintenance is to rectify financial imbalances stemming from the end of a relationship, ensuring a just and satisfactory outcome for both parties. The court evaluates the recipient's ability to be self-sufficient, and the payer's capability to provide support. It's crucial to understand that maintenance orders are crafted to suit individual circumstances, with provisions for adjustments due to changing conditions over time.

Spousal maintenance in New Zealand serves as a means to uphold fairness and economic stability following separation. Effective negotiation, or court proceedings, are often important steps in attaining equitable arrangements.  Seeking professional legal counsel is key to successfully navigating this landscape: ensuring that spousal maintenance solutions align with legal parameters, while effectively safeguarding the interests of all parties involved.

Our experienced family law team will review your specific circumstances before advising you on your spousal maintenance obligations or entitlements. This includes finances; childcare costs; negotiating fair arrangements; and ensuring the arrangements are legally enforceable.  Tools for ensuring an effective, fair, and enforceable outcome may include a separation and relationship property agreement, or obtaining Court orders to ensure the mutual arrangements are given effect. 

We are committed to achieving favourable outcomes that safeguard both your financial well-being and the best interests of your children.

The Property (Relationships) Act 1976 (“PRA”) sets out, the rules for dividing property when a relationship ends, whether by separation or death.  Many people are surprised to learn that after three years of being in a de facto relationship, most property acquired during the relationship is generally divided equally – regardless of whose name it is in, or who paid for it. This can include the family home, KiwiSaver, business interests, investments, and even increases in value of assets brought into the relationship. The three year timeframe is not a hard and fast pre-requisite for equal property division, however.  There are a number of other factors that are considered in determining whether or not a relationship is a “de- facto” one and therefore subject to the equal sharing principles of the PRA.   Without proper planning and advice, assets you have worked hard to build can unintentionally become subject to a 50/50 split.

Taking early legal advice allows you to understand your risk and put appropriate safeguards in place. This may include entering into a contracting out agreement (often called a “pre-nup”), structuring ownership of assets carefully (depending on whether or not you are yet contemplating a relationship with someone), or reviewing existing arrangements to ensure they are effective.  For example, although assets acquired by succession or inheritance are generally regarded as separate property, without proper protections in place there is a risk that property can become intermingled with other property, and therefore be deemed part of the relationship property pool.  Good advice is not about mistrust in your relationship — it is about gaining clarity, fairness, and certainty. By addressing these issues upfront, you reduce the risk of costly disputes later and protect both your assets and your peace of mind.

The Property (Relationships) Act (“the PRA”) applies to:

• married couples;

• couples who have had a civil union; or

• de facto couples, and whose relationship has endured for more than 3 years.

It provides the regime for classifying and dividing property at the end of the couple’s relationship, whether through separation or death. It automatically governs the property rights between the parties to a relationship UNLESS they have contracted out of the PRA. The PRA establishes an “opt out” regime.

Unless the parties have “opted out”, on separation their relationship property is divided equally. That sort of outcome may be less than desirable for some couples. Particularly for those who have had prior relationships and wish to protect assets for themselves or their children, it is important to “opt out”.

Section 21 of the PRA gives couples, as well as intending couples, the right to make any agreement they wish for the purpose of opting out of the PRA with respect to the status, ownership and division of their property whether it is existing property or future property. Couples opt out by entering into a section 21 contracting out agreement. An agreement can classify property and how spouses and partners will settle any property disputes between themselves. Importantly, the contracting out regime cannot be used to defeat the rights of creditors.

An agreement may deal with all of a couple’s property or it may deal with specific items.

One of the things that can be included in a contracting out agreement is whether the couple will be bound by the terms of each other’s Wills, or whether they may challenge those Wills when one of them dies.

Form and Requirements

While a contracting out agreement does not need to be in any particular form, it must comply with certain procedural requirements. If these requirements are not complied with then the agreement may be set aside. Those requirements are:

• The agreement must be in writing and signed by both parties;

• Each party to the agreement must have independent legal advice before signing the agreement;

• The signature of each party to the agreement must be witnessed by a lawyer; and

• The lawyer who witnesses the signature of the party must certify that, before the party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.

Independent legal advice must be truly that. Lawyers must be from different firms. The advice must be quality advice. The Courts have described this advice as requiring an explanation of the agreement AND advice on the assessment of a party’s entitlement under the PRA, AND the implications of the terms of the agreement must be explained as well.

Setting aside an agreement for serious injustice

In 2002, Parliament amended the PRA and increased the stringency of the test that the Courts are to apply when considering whether a contracting out agreement should be set aside. Previously, the test was that enforcement of an agreement would cause injustice. Now, the test is one of serious injustice. That is a high threshold to meet.

It is important that the terms of an agreement are revisited over time. It is impossible to anticipate every event that might occur and change circumstances and it may be that over time the terms of an agreement need to be addressed.

Mactodd can help you with your relationship property queries or any other matters relating to Family Law.