If you are in a long-term relationship, but not married, you may be wondering where you and your partner stand when it comes to ownership of your hard-earned assets. If you were to break-up, who gets what? Are you willing to part with half of the house you spent years saving for?
In New Zealand, the law which governs how your property is to be divided if you separate from your partner is called the Property (Relationships) Act 1976 (“PRA”). If you and your partner are either married, or in a civil union, then the PRA automatically applies to you. It will also automatically apply to you if you and your partner have been together for longer than three years, or in some circumstances even if you haven’t been together for three years.
De facto relationships
Many people presume that they have to be living with their partner for three years before they need to worry about “losing half their stuff”. This is not correct. It is not always a requirement that you live together or have been together for three years.
Whether or not you and your partner are in a de facto relationship will be determined on the particular circumstances of your relationship. The PRA defines a de facto relationship as being a relationship between two people who are both over 18, are not married or in a civil union with one another and live together as a couple.
Living together does not necessarily mean living in the same home. When the Court determines whether or not two people live together as a couple, there are several factors it takes into consideration including:
- How long you have been in a relationship;
- Whether or not a sexual relationship exists;
- The degree of financial independence or dependence each party has on or from the other;
- The nature and extent of common residence;
- The ownership, use and acquisition of property; and
- The degree of mutual commitment to a shared life.
Relationships of short duration
Sometimes, even if you and your partner have not yet hit the magic three year milestone, the PRA can still apply. The Court can make an Order under the PRA if it is satisfied either that there is a child of the de facto relationship or if one of you has made a substantial contribution to the relationship and the failure to make an order would result in serious injustice.
What amounts to a substantial contribution can include either monetary or non-monetary contributions, such as meeting all of the outgoings on the other partners property, caring for the other partners children or funding the start up of a business. It needs to be something beyond the ‘norm’ in a relationship and to not have these contributions recognised would create a serious injustice.
What does this mean for you?
If you meet the definition for a de facto relationship, the PRA will apply if you separate. This means that the home you are living in, your cars, your Kiwisaver, the chattels in your home, and the income you have earnt over the course of your relationship (to name a few of the assets), will be considered relationship property and divided equally between you and your partner, regardless of how these assets are owned.
If you are in a qualifying relationship of short duration, then your assets will be divided according to the contribution each of you made to the relationship. Again, this will be done regardless of how your assets are owned.
This may mean that on separation your partner may be entitled to a significant portion of your hard earned assets, despite having made no financial contribution.
How can we help?
If you and your partner are coming up to the three-year mark in your de facto relationship, or have recently had or expecting a baby, we can help advise you whether or not you should enter into an agreement contracting out of the PRA and specifying how you would like to divide your assets and income.
Our Relationship Property team can discuss this with you in more detail.