Committed Partnerships, Marriage & Property Law

Relationship property law NZ is primarily governed by the Property (Relationships) Act 1976, which dictates how assets are divided upon separation or death. The general rule is an equal 50/50 split of all relationship property for couples who have lived together for three years or more, regardless of whether they are married, in a civil union, or a de facto relationship.

Entering a committed partnership is one of the most significant emotional steps a person can take, but in New Zealand, it is also a profound financial event. The legal landscape surrounding relationships and property is robust, aiming to provide fairness to both parties. However, without a clear understanding of the Property (Relationships) Act 1976 (PRA), couples may find themselves facing unexpected financial consequences if the relationship ends through separation or death. This guide provides a comprehensive analysis of the law, helping you navigate the complexities of asset protection and division.

Overview of the Property (Relationships) Act 1976

The cornerstone of relationship property law in New Zealand is the Property (Relationships) Act 1976. Originally known as the Matrimonial Property Act, it was significantly amended in 2001 to include de facto couples and civil unions, reflecting the changing nature of modern families.

The Act is built on a fundamental presumption: equal sharing. This means that when a qualifying relationship ends, all property defined as “relationship property” should generally be divided 50/50 between the partners. This presumption applies irrespective of who earned the money to buy the assets or whose name is on the title.

To fall under the jurisdiction of the PRA, a relationship must typically last for three years or more. Relationships of shorter duration are treated differently, though there are exceptions where there is a child of the relationship or where one partner has made a substantial contribution that would result in a serious injustice if the Act were not applied.

Marriage vs. De Facto: Understanding the Differences

A common misconception in New Zealand is that “common law marriage” does not exist or that unmarried couples have fewer rights than married couples. In terms of property division, this is incorrect. Under the PRA, de facto relationships are treated almost identically to marriages and civil unions once the three-year threshold is met.

Defining a De Facto Relationship

Determining when a marriage begins is simple—it starts on the wedding day. However, defining the start date of a de facto relationship can be legally complex. Under New Zealand law, two people are in a de facto relationship if they are living together as a couple. The court considers several factors to determine this, including:

• The duration of the relationship.
• The nature and extent of common residence.
• Whether there is a sexual relationship.
• The degree of financial dependence or interdependence.
• The ownership, use, and acquisition of property.
• The commitment to a shared life.
• The care and support of children.
• The reputation and public aspects of the relationship.

Because the start date is subjective, disputes often arise regarding whether the three-year threshold was met. For more detailed statutory definitions, you can refer to the Property (Relationships) Act 1976 on the New Zealand Legislation website.

Distinguishing Relationship Property from Separate Property

To understand your financial exposure, you must distinguish between the two main categories of assets defined by the Act: Relationship Property and Separate Property.

Relationship Property

Relationship property is the pool of assets that gets divided 50/50. This typically includes:

• The Family Home: This is the most critical asset. Even if one partner owned the home prior to the relationship, if it is used as the principal family residence, it usually becomes relationship property after three years.
• Family Chattels: Furniture, appliances, vehicles, and household items used by the family.
• Income: Any income earned by either partner during the relationship.
• KiwiSaver and Superannuation: The portion of retirement savings accumulated during the relationship is considered relationship property.
• Debts: Personal debts incurred for the benefit of the relationship (e.g., a car loan for the family vehicle or renovations on the family home).

Separate Property

Separate property generally remains with the original owner and is not divided. This includes:

• Assets owned before the relationship began (excluding the family home and chattels).
• Inheritances and gifts received by one partner (provided they are kept separate).
• Heirlooms and taonga (Maori treasures).

However, the line between these two categories is porous. Separate property can easily become relationship property through “intermingling,” a concept discussed later in this guide.

Protecting Assets Before Commitment

For individuals bringing significant assets into a relationship, relying on the default rules of the PRA can be risky. The only robust way to circumvent the Act’s equal sharing regime is through a “Contracting Out Agreement,” commonly referred to as a prenup or a Section 21 agreement.

Contracting Out Agreements (Section 21)

A Contracting Out Agreement allows a couple to agree on a different division of property than what the law prescribes. For example, a couple might agree that the house remains the separate property of one partner, regardless of how long they live there.

For a Section 21 agreement to be legally valid in New Zealand, stringent procedural requirements must be met:

1. The agreement must be in writing and signed by both parties.
2. Each party must have independent legal advice before signing.
3. The signature of each party must be witnessed by a lawyer.
4. The lawyer must certify that they have explained the effect and implications of the agreement to their client.

If these steps are not followed, the court can declare the agreement void. Furthermore, the court has the power to set aside an agreement if enforcing it would cause “serious injustice,” although this is a high bar to clear.

Trusts and Relationship Property

Historically, New Zealanders used Family Trusts to protect assets from relationship property claims. However, the legal landscape has shifted. Under Section 44C of the Act, if a partner transfers assets into a trust to defeat the rights of the other partner, the court can order compensation. Additionally, recent case law has made it easier to “bust” trusts or claim that the trust assets are effectively controlled by one partner and should be treated as personal property.

Joint Financial Management and Commingling Risks

One of the most common ways separate property is lost is through intermingling. This occurs when separate property is mixed with relationship property to the point where it is unreasonable or impracticable to regard it as separate.

The Inheritance Trap

Consider a scenario where one partner inherits $100,000 from a parent. If that money is kept in a separate bank account in their sole name, it remains separate property. However, if they use that $100,000 to pay down the mortgage on the family home (which is relationship property), the inheritance generally loses its separate status. Upon separation, the house is still divided 50/50, and the partner cannot easily “claw back” the inheritance.

Income and Expenses

Since income earned during the relationship is relationship property, using your salary to pay for the maintenance of a separate property asset can also complicate matters. If non-monetary contributions (like DIY renovations) or the application of relationship income increases the value of a partner’s separate property, the other partner may have a claim against that increase in value.

Couples wishing to keep finances separate must be meticulous. Maintaining separate bank accounts is a start, but the *application* of the funds is what truly matters to the courts.

Economic Disparity and Unequal Division

While the 50/50 rule is the standard, Section 15 of the PRA allows the court to award a greater share of relationship property to one partner if there is a significant economic disparity between the parties at the end of the relationship.

This provision is designed to address situations where one partner has sacrificed their career or earning potential for the benefit of the relationship (e.g., staying home to raise children), leaving them with a much lower earning capacity than the other partner post-separation. In such cases, the court may award a lump sum payment out of the relationship property to redress this imbalance. This is a complex area of law requiring expert forensic accounting and legal analysis.

Navigating Separation and Death

Relationship property law applies not only when a couple separates but also when one partner dies. This often surprises surviving spouses who assume the Will dictates everything.

Separation

Upon separation, no assets should be distributed until a separation agreement is finalized. This agreement must follow the same strict certification rules as a Section 21 agreement (independent legal advice, etc.) to be binding. Informal agreements written on a napkin are generally unenforceable.

Death: Option A vs. Option B

Under the PRA, a surviving spouse or partner has a choice to make within six months of the grant of administration:

• Option A: Apply for a division of relationship property under the Act. This takes precedence over the Will. If the relationship property division (usually 50%) is greater than what was left in the Will, the survivor may choose this option.
• Option B: Accept what has been left to them under the Will (or the laws of intestacy if there is no Will).

This ensures that a partner cannot be “written out” of a Will and left with nothing if they have contributed to the relationship property. For more information on legal rights after death, resources such as Community Law NZ provide valuable guidance.

Frequently Asked Questions

Below are common questions regarding relationship property law in New Zealand.