The law relating to the division of relationship property is something that a significant number of New Zealanders deal with at some point during their lifetime, when entering into a contracting out agreement at the start of a relationship, splitting property at the end of a relationship, or even as a child watching their parents negotiate those moments. The law dealing with relationship property is likely to be replaced, now that the Law Commission has released a report recommending significant changes.
Why is it changing?
Social changes have affected what the public considers to be a “just” division of property.
The current legislation began life as the Matrimonial Property Act 1976, and was renamed the Property (Relationships) Act 1976 (PRA) in 2001, when it was extended to cover de facto relationships. Society has changed in a myriad of ways since 1976, and even since 2001. The Law Commission decided that the current law is “no longer fit for purpose for 21st century New Zealand.”
New legislation will reflect current New Zealand society, and provide for the reasonable expectations of New Zealanders.
What will the new legislation say?
The main principle of the new legislation is that there should be an entitlement to “share the fruits of the joint family venture”, regardless of the different ways that each partner has contributed.
The key changes include:
1. That the family home will not automatically be deemed to be relationship property. If one partner owned the home prior to the relationship, or received it during the relationship as a gift or inheritance, then it will remain that partner’s separate roperty. However, the increase in value of the family home during the relationship may still be considered to be relationship property.
2. That the Court’s power over trusts is widened such that the Court can make orders over trust property where:
2.1 property has been disposed of to a trust when a qualifying relationship was reasonably contemplated which has had the effect of defeating a claim (there is no need to show intention); or
2.2 where trust property has been sustained by relationship property or the actions of either parties in the relationship; or
2.3 where the increase in value of the trust property (or incomes and gains derived from the trust property) is directly or indirectly attributable to the application of relationship property or the action of either party to the relationship.
3. Section 182 of the Family Proceedings Act which allows the court to revisit the terms of settlements (including trusts) which are considered “nuptial” in nature is to be revoked.
4. The existing express aim to encourage a “clean break” will not be carried on. The Law Commission’s view is that this is one factor to consider, but that it can be at odds with other factors, particularly the best interests of any child.
5. The Law Commission has also recommended introducing Family Income Sharing Arrangements (FISAs). Under a FISA, partners would share income for a specified period, calculated by a formula that takes into account the partners' incomes before separation and the length of the partners' relationship. FISA will replace both spousal maintenance and the Court's compensatory powers to order unequal sharing in relationship property where there in an economic disparity between the parties at the end of a relationship and.
6. The new legislation is expected to only apply to a relationship that ends on separation not death. The Law Commission has called for a wider review of succession law, which would include dealing with relationship property claims arising on the death of a partner, alongside family protection claims and testamentary promises claims.
When will it happen?
The Law Commission’s report is just the beginning of the process. If the Government decides to implement the recommendations it will draft legislation, which will be introduced to Parliament and progress in the usual way. There will be an opportunity for members of the public to have their say when the legislation is considered by a select committee, and further changes could occur as a result of that process.
Any change in the law is likely to still be a few years away.
If you have any questions, please contact Amanda Bradley.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.