What is the Property (Relationships) Act and who does it apply to?
The Property (Relationships) Act is the legislation that helps determine how property is divided when a relationship ends.
The Act is based on the principle that both individuals in a relationship are equal, that both financial and non-financial contributions to the relationship should be treated equally, and that the division of property should take into account any economic advantages or disadvantages that one party may have experienced as a result of the relationship.
The Act covers:
- married couples
- couples in a civil union
- couples in a de facto relationship for at least three years
- couples in a de facto relationship for less than three years, who have a child (see Relationship property issues)
- couples in a de facto relationship for less than three years where one partner has made substantial contributions to the relationship, and it would cause serious injustice if that person was not covered (see Relationship property issues).
The Act applies when a relationship which meets the above criteria ends, either because the couple has separated or because one partner or spouse has died.
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What is relationship property?
Relationship property is the property that must be distributed between the parties when a relationship ends.
Relationship property will usually include:
- the family home and chattels (e.g. household furniture, the family car)
- any property acquired by either partner before the relationship, intended for the common use or benefit of both partners
- property owned jointly or in equal shares by the spouses or partners
- property acquired by either spouse or partner during the relationship (except for gifts and inheritances)
- income earned during the relationship
- joint debts
- insurance on the spouses’/partners’ relationship property
- superannuation (including KiwiSaver funds) or life insurance, which has built up during the relationship
- gifts or inheritances which the owning partner allows to become mixed with other relationship property, for example inheritance money is used to buy a computer for household use
- property which both spouses or partners agree is relationship property
- increases in the value of relationship property, income from it, or money from the sale of it
More about what relationship property is, is in the NZ Law Society guide to Dividing up Relationship Property.
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What is separate property?
Separate property is all property that is not relationship property, and stays with the person who owns it.
Separate property will remain so if it is kept separate from the relationship during the marriage, civil union, or de facto relationship. Usually, separate property is not shared in the event of a break-up. If you want to protect this property, you should make an arrangement with your spouse or partner and make sure that you keep this property separate from any relationship property.
Separate property includes:
- any property acquired by either spouse or partner while they were not living together as a couple
- income that is acquired from separate property e.g. proceeds from the sale of any separate property
- any increase in the value of separate property, unless it is caused by the actions of the other spouse or partner or by the use of relationship property
- family heirlooms or taonga
- gifts and inherited property which a spouse or partner receives during a relationship, unless they’re mixed with relationship property (e.g. you used your inheritance to pay off the mortgage on the family home.
The separate property of one spouse or partner may become relationship property if it gets mixed with relationship property or used for relationship purposes. For example if:
- the owner puts their separate property into relationship property, e.g. putting an inheritance into a joint bank account;
- the other spouse or partner’s actions have helped to increase the value or income from the separate property;
- relationship property has been used to bring about growth in, or income from separate property, for example if relationship money is used to refurbish a rental flat inherited by one of the partners then the flat may be regarded as relationship property;
- the separate property was obtained while the partners were living apart but the Court thinks it’s fair to treat it as relationship property.
More information about separate property is in the NZ Law Society guide to Dividing up Relationship Property.
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How will our property be divided if our relationship ends?
You and your partner can agree between you, how the relationship property will be divided. If you can’t agree you can apply to the Family Court for a decision. The Court will usually order that the relationship property be shared equally between the two of you.
There are exceptions to the equal division of property, such as where doing so would be seriously unjust, or where one of you is economically disadvantaged at the end of the relationship and this is because of the different roles you have had during the relationship.
For example, if you put your career on hold to stay at home and look after children while your partner stayed in work and advanced in their career, the Court may order that you be compensated from your partner’s relationship property.
Different rules apply to relationships that have lasted for less than three years.
More about this is on the Ministry of Justice website.
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What about if we have children? How will this affect the way our property gets divided?
Under the Property (Relationships) Act, the Court must consider the interests of any dependent children of the relationship. The Court may:
- settle relationship property so that it will benefit the children
- make an order delaying the relationship property being divided to stop the main caregiver of the children suffering from unfair difficulty
- make an occupation order or tenancy order allowing the main caregiver of the children to keep the family home
- make a furniture order giving either spouse or partner specific furniture if it is needed for the children
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What happens to our property if our relationship is not covered by the Act?
If the Act doesn’t apply to your situation, then you or your partner’s rights to a particular piece of property depend on the ordinary rules of ownership – this means that the person with legal title to the piece of property owns it. You may be entitled to a share of particular items if you bought the property together.
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What can we do if my partner and I don’t want our property to be divided according to the Property (Relationships) Act?
You and your partner can make your own agreement about how you will manage the property during your relationship, and how you will divide it if your relationship breaks up. This kind of agreement can be made at any time during your relationship or after your relationship ends. This is called "contracting out" of the Act and is sometimes also referred to as a pre-nuptial agreement or "prenup".
It’s important to note that even if you contract out of the Act and later separate, the Court can still override the agreement if it decides that the agreement would result in a serious injustice to one of the parties.
When a contracting out agreement is made, the following rules must be followed or it might not be legally enforceable:
- The agreement has to be in writing and signed by both parties
- Each party must have taken independent legal advice before signing the agreement
- The signature of each partner has to be witnessed by a lawyer, who must certify that he or she has explained to the party the effect and implications of the agreement.
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Is there a template we can use to draw up our relationship property agreement?
The Property (Relationships) Model Form of Agreement Regulations 2001 has a template you can use, or your lawyer can draw up an agreement for you.Remember that regardless of whether you use a template or write it yourselves, it will need to be checked by your respective lawyers, who may suggest amendments to ensure the agreement’s validity.
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Is a pre-nuptial agreement that was drawn up and signed overseas valid in New Zealand?
If you have property in New Zealand then this property is covered by New Zealand law. If your contracting out agreement
was drawn up and signed overseas, you could be at a disadvantage if you did not get independent advice about the agreement from lawyers who were experienced in New Zealand law.
It would be wise for both of you to receive independent legal advice from New Zealand lawyers, to ensure that the agreement covers your respective New Zealand property as you both intended.
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Do we have to go to Court to divide our property if our relationship ends?
Not necessarily. You should only apply to the Family Court as a last resort if you and your partner cannot agree on how to divide your property. You can read more about this, including how much it costs, on the Ministry of Justice website.
Note that if you have children and are using Family Dispute Resolution mediation to help you come to an agreement about the day to day care of the children, you can also discuss the division of the relationship property during mediation, if this will help you to agree about the children. For more information see our Care of children disputes - mediation page.