Relationship property: Dividing your property when you split up

 

Overview and summary

Property (Relationships) Act 1976, ss 1C, 1M

The Property (Relationships) Act 1976 deals with how the property of married couples, civil union partners and de facto couples is divided when a relationship ends. The Act covers a relationship ending because of a break-up, but it can also cover a relationship ending because of the death of a spouse or partner.

The purpose of the Act is to recognise the equal contributions of both partners to their relationship and to provide for a just division of property when their relationship ends, taking into account the interests of their children. The general presumption of the Act is that a couple’s property will be divided equally between them. There are exceptions to this rule, however. In particular, there are different rules about how property is to be divided where a relationship has lasted less than three years.

Who’s covered by the Property (Relationships) Act: A summary

Whether the rules in the Property (Relationships) Act 1976 apply to you and your ex-partner depends on the type of relationship it was and how long you were together.

  • Couples who’ve been together three years – Married, civil union and de facto couples who’ve been together for at least three years are covered by the equal-sharing rules in the Act. This means the family home, car, and furniture and appliances will usually be shared equally between them.
  • Short-term marriages and civil unions – Married and civil union couples who’ve been together less than three years are covered by the Act. But in some cases, the family home, car and so on may be divided according to each person’s contributions to the relationship (including non-financial contributions), rather than being shared equally.
  • Short-term de facto relationships usually not covered – De facto couples who’ve been together for less than three years usually aren’t covered by the Act at all. This means that the ordinary rules of property ownership will decide what each person is entitled to. But there are some exceptions to this. And for information about exactly what a “de facto relationship” is under the Property (Relationships) Act, click here.

Making your own agreement

Property (Relationships) Act 1976, ss 21A, 21F

In the first instance, it is up to the couple to decide how they will divide their relationship property. If they can agree on how they will divide the relationship property, then they can do this without having to follow the rules of the Property (Relationships) Act and without having to go to court.

However, any agreement must be in writing and must meet various legal requirements, including that the parties each get independent legal advice (see “Contracting out of the Property (Relationships) Act” below in this section).

Principles of relationship property law

Property (Relationships) Act 1976, s 1N

The law relating to the division of relationship property is guided by these general principles:

  • Men and women have equal status, and their equality should be maintained and enhanced.
  • All forms of contribution to the relationship are treated as equal. This means non-financial contributions, such as caring for children, are valued equally with financial contributions, such as working for a wage.
  • A just division of relationship property needs to take into account any economic advantages or disadvantages to a spouse or partner as a result of the relationship or as a result of the ending of the relationship.
  • Relationship property issues should be resolved as inexpensively, simply and quickly as is consistent with justice.

Who’s covered by the Property (Relationships) Act

What kinds of relationships does the Act cover?

Property (Relationships) Act 1976, s 1C

The Act covers:

  • married couples
  • civil union couples
  • de facto couples whose relationship has lasted at least three years (with some exceptions).

The Property (Relationships) Act applies both when a couple separates and when one of the partners has died.

Note: Property (Relationships) Act 1976, s 24

An application under the Property (Relationships) Act to divide the property of a married couple or civil union partnership must be made within a year of the couple’s partnership being dissolved by a court order (see “Dissolution (divorce)” in this chapter) or, in the case of a de facto couple, within three years of the relationship ending.

What is a “de facto relationship” under the Property (Relationships) Act?

Property (Relationships) Act 1976, s 2D

For the purposes of the Property (Relationships) Act, a de facto relationship is a relationship between two people (whether of different sexes or the same sex) who are both aged over 18 years and are living together as a couple, but are not married to, or in a civil union with, each other.

When deciding whether two people are living together as a couple, a number of factors are taken into account:

  • the length of the relationship
  • whether the parties are living in one house
  • whether they have a sexual relationship
  • the degree of financial dependence or interdependence
  • how property is owned, used and obtained
  • the degree of commitment to a shared life
  • the care and support of children
  • the performance of household duties
  • the public image of the relationship.

Whether there is a de facto relationship in terms of the Property (Relationships) Act and if there is, on what date it began, will be questions of fact for the court to decide. If the court decides that two people are in a de facto relationship, there is then the question of what rules will apply to the division of their property. The Act will usually only apply to a de facto couple if they have been together for at least three years (see below “Short-term relationships: When the Act applies”, and see also in this section “Exceptions to equal sharing of relationship property / De facto relationships of short duration”).

Short-term relationships: When the Act applies

Property (Relationships) Act 1976, ss 2E, 14, 14AA, 14A

Under the Property (Relationships) Act, a relationship of short duration is one that lasts for less than three years. In some circumstances, where the court considers it just, a longer relationship can also be considered to be “of short duration”.

Marriages and civil unions of short duration are covered by the Act, but special rules apply.

De facto relationships of short duration are usually not covered by the Act unless:

  • there is a child of the relationship, or
  • one party has made a substantial contribution to the de facto relationship (including non-financial contributions), and
  • the court is satisfied that failure to make an order would result in serious injustice.

In circumstances where a relationship of short duration is covered by the Property (Relationships) Act, special rules apply to the division of the relationship property (see in this section “Exceptions to equal sharing of relationship property / Marriages and civil unions of short duration” and “De facto relationships of short duration”).

What if a couple lived together before their marriage or civil union?

Property (Relationships) Act 1976, ss 2B, 2BA

In terms of working out the length of the relationship, a de facto relationship that immediately precedes a marriage is treated as if it were part of the overall length of the marriage relationship.

Similarly, if a married couple were in a civil union before they got married or the other way round, the length of the relationship for the purposes of the Property (Relationships) Act is the total of both.

Classifying and valuing relationship property

Relationship property and separate property

Property is divided into two categories, relationship property and separate property.

What is “relationship property”?

Property (Relationships) Act 1976, s 8

Relationship property is the property that must be divided between the parties when their relationship ends. Relationship property will usually include:

  • family home and chattels (including the family car, household furniture and effects, and anything else owned by the family or used for family purposes). These are all usually considered relationship property regardless of who paid for them or when they were acquired.
  • family businesses and investments (the general rule is that any business used to produce family income and any savings or investments made out of family income are treated as relationship property)
  • property owned jointly or in equal shares by the spouses or partners
  • property acquired during the relationship
  • property acquired in contemplation of the relationship and intended for common use or common benefit
  • contributions to superannuation and insurance policies after the relationship began
  • increases in the value of relationship property, or any income from it or any proceeds from selling it.

    Note: Taonga and heirlooms are excluded from the definition of “family chattels” and so will usually be separate property rather than relationship property, but this will need to be decided on a case-by-case basis.

What is “separate property”?

Property (Relationships) Act 1976, ss 9, 10

Separate property is the property of each spouse or partner that is not relationship property. The general rule is that separate property remains the property of the spouse or partner who owns it and does not have to be divided according to relationship property law.

Separate property includes:

  • property acquired by either spouse or partner while they are not living together as a couple
  • property acquired out of separate property and any proceeds of sale of separate property
  • increases in value of separate property, and income, interest or dividends earned from separate property
  • property that a spouse or partner acquires from a third person by gift, inheritance, or because the spouse or partner is a beneficiary under a trust settled by a third person (unless this property gets mixed with relationship property).

    Note: Gifts given by one spouse or partner to the other are not relationship property unless the gift is used for the benefit of both spouses or partners.

Can separate property become relationship property?

Property (Relationships) Act 1976, s 9A

Separate property may become relationship property if it gets mixed with relationship property or used for family purposes. For example, separate property may become relationship property where it is used to acquire or improve relationship property.

Also, where the value of one spouse’s or partner’s separate property is increased by:

  • the direct or indirect actions of the other spouse or partner, or
  • the use of relationship property,
  • then the increase in the value of the separate property is considered to be relationship property.

Classifying debts

Property (Relationships) Act 1976, s 20

Debts are separated into two categories: personal debts and relationship debts.

Personal debts are the responsibility of the person who incurred them.

Relationship debts usually fall into one of the following categories:

  • joint debts
  • common enterprise (or joint business) debts
  • debts incurred to acquire, improve, maintain or repair relationship property
  • debts incurred for the benefit of both parties in managing the household
  • debts incurred for bringing up children of the relationship.

Property (Relationships) Act 1976, s 20D

The value of the relationship property that is available to be divided is the total value of the relationship property minus the relationship debts.

Note: Whether a student loan is a personal debt or a relationship debt will need to be decided on a case-by-case basis.

Valuing relationship property

How is the value of the relationship property worked out?

Property (Relationships) Act 1976, s 2G

The general rule is that the property being divided under the Property (Relationships) Act is valued at the date of the court hearing. However, the court does have the discretion to set a different date for valuation if it thinks it is appropriate.

If there is any dispute about the value of property or household items, it is important for the parties to get independent valuations.

Applying to the Family Court for a relationship property order

How much does it cost to apply for a relationship property order?

Family Courts Fees Regulations 2009, regs 5B, 7, Schedule 3

There is a fee of $700 for filing any relationship property application with the Family Court. If your case goes to a Family Court hearing in front of a judge, you will also have to pay an additional fee of $906 for each half-day (three hours) or part half-day (up to three hours). If either party chooses to use a lawyer, they will also have to pay their lawyer’s fees.

If you’re unable to pay the fee, you can apply to have it cancelled in your case (this is called a fee “waiver”). You’ll need to show that you’re dependent on a benefit or completely dependent on New Zealand superannuation or a veteran’s pension, or that you’d suffer “undue financial hardship” if you had to pay the fee.

Time limit for applying under the Act

Property (Relationships) Act 1976, s 24

There is a time limit for applications for orders under the Property (Relationships) Act:

  • In the case of a marriage or civil union, you must apply within one year after it is dissolved.
  • In the case of a de facto relationship, you must apply within three years after the relationship ends.

Rules for dividing relationship property

Presumption of equal sharing of relationship property

Property (Relationships) Act 1976, s 11

If the couple cannot agree about how they will divide the relationship property, then one of them can apply to the Family Court for the property to be divided under the rules in the Property (Relationships) Act.

If the relationship has lasted at least three years, the general rule is that relationship property is divided equally between the couple.

At what date are the shares in relationship property determined?

Property (Relationships) Act 1976, s 2F

If the relationship has ended, the shares of each spouse or partner in the relationship property are determined as at the date the relationship ended. If the couple are still living together, their shares in the relationship property are determined at the date an application for property division is made to the court.

How can children be provided for?

Property (Relationships) Act 1976, ss 26-28D

Under the Property (Relationships) Act, the court must have regard to the interests of any minor or dependent children of the relationship. In doing this, the court can:

  • award relationship property for the benefit of the children
  • make an order postponing the division of relationship property to prevent undue hardship to the spouse or partner who is the principal provider of care for the children
  • recognise the need for children to have a home and make an occupation order or tenancy order allowing the spouse or partner who is the principal provider of care for the children to retain possession of the family home
  • recognise the need for children to have suitable furniture and make a furniture order granting either spouse or partner the possession and use of specific furniture.

What happens if relationship property has been transferred to a trust?

Property (Relationships) Act 1976, s 44C

If a spouse or partner transfers relationship property to a trust and this has the effect of defeating the other spouse’s or partner’s claim under the Act, then the court can order compensation in one or more of the following ways:

  • payment of a sum of money to the other spouse or partner out of relationship property or separate property
  • transfer of relationship property or separate property to the other spouse or partner
  • payment of income from the trust to the other spouse or partner.

Exceptions to equal sharing of relationship property

In certain situations, the Family Court can depart from the equal-sharing rules for relationship property – for instance:

  • if equal sharing is very unfair (“repugnant to justice”)
  • if there is economic disparity at the end of a relationship
  • if each party owned a home at the date the relationship began
  • if the value of one spouse’s or partner’s separate property has been increased, sustained or reduced by the other spouse or partner
  • if the relationship is of short duration.

(These exceptions are discussed further below.)

If equal sharing would be very unfair (“repugnant to justice”)

Property (Relationships) Act 1976, s 13

The court can order an uneven division of relationship property where there are extraordinary circumstances that make equal sharing “repugnant to justice”. This means that equal division would be totally unfair to one of the spouses or partners. In this case, each person’s share is decided according to their contributions to the relationship (including non-financial contributions). The test is very stringent, and is only rarely met. The circumstances need to be exceptional to meet this test.

If one partner is economically disadvantaged at the end of the relationship

Property (Relationships) Act 1976, ss 15, 15A

An uneven property division may be ordered when there is economic “disparity” between the spouses or partners at the end of a relationship, but only if the disparity is due to the “division of functions” within the relationship while the parties were living together.

Note: Economic disparity means that the income and living standards of one spouse or partner are likely to be significantly higher than those of the other spouse or partner.

“Division of functions” within the relationship refers to the way in which people organise their lives. For example:

  • one partner stays at home and looks after the children while the other works, or
  • one partner supports the other while they are studying and gaining a qualification.

If one partner has been economically disadvantaged by the “division of functions” within the relationship, the court can decide to make an uneven division of the relationship property by awarding a lump sum to one spouse or partner out of the other spouse’s or partner’s relationship property.

If the spouse or partner who is in the better economic position has also been able to increase the value of their separate property during the relationship (due to the division of functions within the relationship), the court can provide compensation to the other spouse or partner out of either relationship property or separate property.

In deciding about whether to order an uneven division of relationship property in the above situations, the court can consider:

  • the likely earning capacity of each person, and
  • the responsibilities of each person for the ongoing daily care of any minor or dependent children of the relationship, and
  • any other relevant circumstances.

If each partner owned a home when the relationship began

Property (Relationships) Act 1976, s 16

Sometimes, at the time when a relationship begins, both spouses or partners might own a home capable of becoming the family home. But, at the time when the relationship property is to be divided, the home (or the proceeds of the sale of the home) of only one spouse or partner is included in the relationship property. In these cases, the court may adjust the division of relationship property to compensate for this. The court may also make an adjustment if one home was sold before the relationship began because the two parties were then planning to set up house together.

If the value of separate property was affected by the other partner

Property (Relationships) Act 1976, ss 9A, 17, 17A

Where the value of one spouse’s or partner’s separate property is increased by:

  • the direct or indirect actions of the other spouse or partner, or
  • the use of relationship property,

then the increase in the value of the separate property is considered to be relationship property and is divided according to the contributions of each spouse or partner to the increase.

Where the separate property of one spouse or partner has been sustained by:

  • the direct or indirect actions of the other spouse or partner, or
  • the use of relationship property,

the court may increase the share of the other spouse or partner in the relationship property or order that they be paid compensation.

Where the separate property of one spouse or partner has been materially reduced in value by the deliberate action or inaction of the other spouse or partner, the court may reduce the share of the other spouse or partner in the relationship property.

Marriages and civil unions of short duration

Property (Relationships) Act 1976, ss 2E, 14, 14AA

For marriages and civil unions that last less than three years, the general principle is that equal sharing won’t apply to the family home and chattels if:

  • they were owned wholly or substantially by one party at the date of the marriage or civil union, or
  • they were acquired after the date of the marriage by succession, survivorship, trust or gift by a third person, or
  • one party’s contribution to the marriage or civil union (including non-financial contributions) was disproportionately greater than the other.

In these cases, the family home and chattels will be divided according to each spouse or partner’s contribution to the marriage or civil union.

For other relationship property, equal sharing applies unless one spouse or partner has made a clearly greater contribution to the marriage or civil union. In these cases, the relationship property will be divided according to each spouse or partner’s contribution to the marriage or civil union.

De facto relationships of short duration

Property (Relationships) Act 1976, ss 2E, 14A

If a de facto relationship lasts for less than three years, the Property (Relationships) Act will usually not apply. Instead, the general rule is that the parties each take out what they brought into the relationship and retain the property that is in their own name. If one partner wishes to claim a share of the other’s property, this can only be done by applying to the High Court and arguing that there is a “constructive trust” in place.

However, the Property (Relationships) Act may still be used for a de facto relationship of short duration if:

  • there is a child of the relationship, or
  • the applicant has made a substantial contribution to the de facto relationship (including non-financial contributions),

and if

  • the court is satisfied that failure to make the order for the division of relationship property would result in serious injustice.

If this is the case, the relationship property will be divided according to the contribution of each partner to the de facto relationship.

Division of property when a spouse or partner has died

Survivor must choose whether to apply for division under Property (Relationships) Act

Property (Relationships) Act 1976, Part 8

The Property (Relationships) Act also covers division of property when a relationship ends because a spouse or partner dies.

The surviving spouse or partner has to choose whether to apply for relationship property to be divided under the Act or whether to take what is left to them under the deceased’s will, if there is one, or under the intestacy rules in the Administration Act 1969, if there’s no will (see the chapter “Wills”).

If a surviving spouse or partner makes a claim under the Act, this takes precedence over any other person’s claim under inheritance law. This recognises that one spouse or partner should not be able to give away the other spouse’s or partner’s share of relationship property in their will.

Making your own agreement to divide your property: “Contracting out”

Property (Relationships) Act 1976, Part 6

Can a couple contract out of the Property (Relationships) Act?

Property (Relationships) Act 1976, ss 21-21D

A couple can choose to share their property differently than how the Property (Relationships) Act sets out. They can do this by making a contracting out agreement (sometimes known as a “prenuptial” agreement – or “pre-nup”) which says how they want to share the property. Using a contracting out agreement is the only binding way of dividing property if a relationship ends, other than going to court and having court orders made.

When can a contracting out agreement be made?

Property (Relationships) Act 1976, s 21

A contracting out agreement can be made at any time: upon entering a relationship, during it, or at the end of the relationship. Agreements are often used by couples entering a second or subsequent relationship later in life, especially if they already have substantial property which they wish to keep as their own separate property. It is, however, important that an agreement is made before the relationship or marriage/civil union has lasted three years, as entitlements will change at that time.

What requirements must be met for a contracting out agreement to be valid?

Property (Relationships) Act 1976, s 21F

There are important requirements that must be complied with if the agreement is to be valid:

  • The agreement must be in writing and signed by both parties.
  • Each party must get independent legal advice before signing the agreement. This means that the parties will need to get advice from separate lawyers.
  • The signature of each party to the agreement must be witnessed by their lawyer.
  • The lawyer who witnesses someone’s signature must certify that, before the person signed the agreement, the lawyer explained to that person the effect and implications of the agreement.

These requirements are designed to protect the people entering into a contracting out agreement, as an agreement has the same effect as a court order and cannot be easily set aside.

Can the court set aside a contracting out agreement?

Property (Relationships) Act 1976, s 21J

The court can only set aside a contracting out agreement if it would result in a “serious injustice”. For example, this might be where an agreement is very one-sided and doesn’t allow one partner to share in property acquired during the relationship.

Find your local

Community Law Centre

View all law centre listings

Key | Community Law Centres | Outreach Clinics

back to top