Relationship Property - Contracting Out Agreements

Increasingly New Zealanders are becoming more alert to the implications of the Property (Relationships) Act 1976 (“the Act”) and are seeking legal advice about the preservation of their hard-earned property. 

Who can enter into an agreement?

Section 21 of the Act enables a husband and wife, civil union partners, de facto partners, or two persons in contemplation of entering into a marriage, civil union or de facto relationship to contract out of the provisions of the Act.

Why enter into an agreement?

In a recent decision of the Court of Appeal, Harrison -v- Harrison, the court commented, “the paradigm situation in which a contracting out agreement will be sought is where one party has pre-relationship assets of a significant magnitude to render justifiable the social awkwardness of insisting on a contracting out agreement…”

There are numerous reasons for electing to contract out of the Act.  Usually, it is to avoid the presumption of equal sharing of property that arises when the relationship ends.  However, an agreement may also assist with asset, estate or tax planning.  It may be a desire by one or both parties to preserve all of the property owned or acquired by them prior to the commencement of the relationship as his or her own separate property.  Alternatively, the parties may simply wish to record their decision to treat certain property differently.  

What can be included in the agreement?

Section 21D of the Act sets out what can be included in an agreement.  An agreement can:

(a)    declare property to be separate or relationship property;
(b)    define the share each party to the agreement has in any part or all of the relationship property;
(c)    define those shares on death;
(d)    provide for the calculation of the shares; and
(e)    prescribe the method by which the relationship property is to be divided.

Section 21 of the Act permits parties to an agreement to make any arrangements they think fit with respect to their property, including property acquired in the future by either or both of the parties. 

“Property” is specifically defined in Section 2 of the Act and includes the following:

(a)    real property (i.e. land);
(b)    personal property;
(c)    any estate or interest in any real property or personal property;
(d)    a debt; and
(e)    any other right or interest.

How is the agreement made valid?

Future Considerations

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