Changes to the Property (Relationships) Act

The Law Commission has made 140 recommendations to the Government after a three year review of the Property (Relationships) Act 1976. The Government will now consider these recommendations.

One of the recommendations concerns how the family home is shared on the breakdown of the relationship. Currently the home is shared equally regardless of when it was acquired, or whose name it is in.

 

The recommendation is that if the family home was owned by one partner before the relationship began, or was received as a gift or inheritance, only the increase in value of the home during the relationship should be shared.

 

This change will stick on the throats of those who have had their rights determined under the current Act for the last 17 years, and those who will continue to be affected by it until a new Act comes into force.

 

The current Act came into force on 1 February 2002. The very first High Court hearing that the Act applied to started on 18 February 2002.

 

In that case the husband had owned the family home at least 9 years before the relationship began. The relationship itself was between 12 and 14 years in length, the exact start of the de facto component was not certain.  The uncertainty around the exact length of the relationship did not matter. The relationship was more than three years long and the value of the family home in its entirety was shared equally.

 

By contrast a second property which the wife had purchased during the relationship and to which she had contributed approximately $51,000, received from her parents during the relationship, was found to have a separate property component to that value with the balance being shared equally.

 

If the recommendations of the Law Commission were law the husband would have had a protected sum due to the value of the house at the start of the relationship, with the balance shared equally. The wife’s property would likely be treated the same as it was by the High Court in 2002.

 

For most people their home is their major asset. It is common for one person to own a home before a relationship, and for the couple to move into that. It is very common in second relationships. The current equal sharing regime impacts particularly on those people.

 

Before people get excited about the recommendations, they are just that. They have to be considered by the Government and the Justice Minister has said they would need to consider the wider impacts of changes.

 

We would not recommend that you stay in a relationship that is unhappy or dysfunctional in the hope that change is just round the corner and that any change will be more advantageous to you. Any change to the law is some time off and is unknown.

 

The best protection for a couple is to have a properly executed Contracting Out Agreement in place during the relationship that clearly sets out what your expectations are around your assets.

Author

Penny Henderson

Relationships - Partner

+64 3 339 5644

penny.henderson@cavell.co.nz

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