Relationship Property in NZ: How Assets Are Divided When a Relationship Ends

Few areas of law touch people’s lives as directly as relationship property. When a marriage, civil union or de facto relationship ends, through separation or death, the Property (Relationships) Act 1976 determines how the couple’s property is divided. Many people are surprised by how the Act works, particularly the strength of the equal sharing rule and the fact that it applies to de facto couples. This guide explains who the Act covers, what gets divided, the main exceptions, and how a contracting out agreement lets you set your own rules.

The Act applies to married couples, civil union partners and de facto partners. For de facto couples, the equal sharing regime generally applies once the relationship has lasted three years. Whether a de facto relationship exists is assessed on the whole picture, including matters listed in the Act such as living arrangements, financial interdependence, care of children and how the couple presented themselves publicly. You do not need to have shared a home full time for a de facto relationship to exist.

Relationships of short duration are treated differently. For marriages and civil unions under three years, division is generally based on each person’s contributions rather than equal sharing. De facto relationships under three years usually fall outside the Act altogether, unless there is a child of the relationship or one partner made a substantial contribution, and the court is satisfied that not applying the Act would cause serious injustice.

The starting point under the Act is simple: relationship property is divided equally. Section 11 entitles each partner to share equally in the family home, the family chattels and all other relationship property. The rule reflects the principle that financial and non financial contributions to a relationship, including caring for children and running the household, are treated as equal.

What counts as relationship property?

• The family home, whenever it was acquired, even if it is owned in one partner’s name
• Family chattels such as furniture, vehicles and household items
• Property acquired during the relationship, including wages, savings and investments
• Superannuation and KiwiSaver entitlements attributable to the relationship period
• Debts incurred for the benefit of the relationship, which are shared in the same way

What is separate property?

• Property owned before the relationship began, other than the family home and chattels
• Inheritances and gifts received by one partner
• Property acquired after separation, in most cases

Separate property does not always stay separate. If an inheritance is paid into a joint account, used to buy the family home or otherwise intermingled with relationship property, it can lose its protected status. Similarly, if the value of separate property increases during the relationship because of the other partner’s contribution or the use of relationship funds, that increase can become relationship property. These intermingling rules are one of the most common sources of dispute we see.

Equal sharing is the strong default, but the Act contains targeted exceptions. Under section 13, the court can depart from equal sharing where there are extraordinary circumstances that make it repugnant to justice. The courts apply this test very strictly and successful cases are rare. Under section 15, where one partner is likely to have significantly lower income and living standards because of the division of functions during the relationship, for example after years out of the workforce raising children, the court can award that partner more than half of the relationship property to compensate for the economic disparity.

Placing assets in a family trust or company does not automatically put them beyond the Act. Where property has been transferred to a trust or a qualifying company in a way that defeats a partner’s rights, the court has powers, including under sections 44 to 44F, to set dispositions aside or order compensation. Anyone with trust structures who is entering a new relationship should take advice early, because the protection a trust offers is far weaker than most people assume.

Couples who do not want the Act’s default rules to apply can enter into a contracting out agreement under section 21, often called a prenuptial agreement or a section 21 contracting out agreement. These agreements can be made before or during a relationship, and a similar mechanism is used for separation agreements once a relationship ends. A contracting out agreement lets you record which assets are separate property, how future assets will be classified and what will happen on separation or death.

Because these agreements override valuable statutory rights, section 21F imposes strict formalities. The agreement is void unless it is in writing and signed by both partners, each partner has received independent legal advice before signing, each signature is witnessed by a lawyer, and the witnessing lawyer certifies that they explained the effect and implications of the agreement before it was signed. Even a compliant agreement can be set aside under section 21J if giving effect to it would cause serious injustice, which is why full financial disclosure at the time of signing and regular reviews every few years are essential.

The Act also applies on death. A surviving spouse or partner can choose between taking what the will (or the intestacy rules) provides, or making a claim for their half share of the relationship property under the Act. This choice can significantly change the outcome for blended families, which is why wills, trusts and any contracting out agreement should always be prepared together as a coordinated plan.

Time limits matter. For married and civil union couples, proceedings under the Act must be filed within 12 months of the dissolution of the marriage or civil union. For de facto couples, the general limit is three years from the end of their relationship. The court can allow claims out of time, but an extension is never guaranteed, so it is important to take advice promptly after separation.

Is my partner entitled to half my house in NZ?

If the property is the family home and your relationship qualifies under the Act, the starting point is equal sharing, even if the home is in your sole name and you owned it before the relationship. A contracting out agreement is the main way to change that outcome.

Does the three year rule mean nothing is shared before three years?

Not necessarily. Shorter marriages and civil unions are divided on contributions, and a shorter de facto relationship can still come under the Act where there is a child or a substantial contribution and serious injustice would otherwise result.

Do we have to go to court to divide our property?

No, and most couples never do. The majority of divisions are recorded in a certified separation and relationship property agreement negotiated between lawyers. The Family Court is the forum of last resort where agreement cannot be reached.

Can a contracting out agreement be challenged?

Yes. An agreement that does not meet the section 21F formalities is void, and even a valid agreement can be set aside if it would cause serious injustice, for example where assets were concealed or circumstances have changed dramatically. Careful drafting, full disclosure and periodic reviews reduce that risk.

Whether you are entering a new relationship and want to protect existing assets, separating and needing a fair division, or planning your estate within a blended family, early advice makes an enormous difference. Bramwell Bate’s relationship property and family law team acts for clients throughout Hastings, Napier and Hawke’s Bay, and will give you clear, practical guidance on your options. Call us on 06 872 8210 or contact one of our team to arrange a confidential discussion.