Buying a home together is one of the biggest financial decisions a couple can make. Before you sign a sale and purchase agreement, it is important to understand how New Zealand’s relationship property laws may apply to your home, and whether a Contracting Out Agreement is appropriate for you.
Many couples assume that ownership will simply reflect whose name is on the title, who paid the deposit, or who has contributed the most to the mortgage. That is not necessarily the case.
Taking legal advice at the outset can help you understand your position, record your intentions, and avoid uncertainty if your circumstances change in the future.
What happens without an agreement?
The Property (Relationships) Act 1976 (the Act) sets out rules for dividing property when a relationship ends.
Once a relationship has lasted for three years, property acquired during the relationship will generally be treated as relationship property. This can apply whether you are married, in a civil union, or in a qualifying de facto relationship.
The family home is particularly important. It is treated as relationship property whenever it was acquired, including if one partner owned it before the relationship began, and regardless of who paid the deposit, who has made the mortgage repayments, whose name is on the title, and/or who contributed more financially.
The starting point is that relationship property is divided equally when a relationship ends. For some couples, equal division does not reflect their expectations or intentions, which is why it is worth discussing your intended ownership and contributions before you buy, rather than trying to resolve those issues after a separation.
What is a Contracting Out Agreement?
A Contracting Out Agreement, sometimes referred to as a “prenup”, allows a couple to agree how their property will be treated if their relationship ends, rather than relying solely on the default rules under the Act. An agreement can be entered into at any time during a relationship.
Contracting Out Agreements are bespoke, drafted to create your own rules for how your property is classified and divided. Couples often enter into such an agreement to protect assets owned before the relationship, ringfence a financial contribution to a specific asset such as the family home, protect an inheritance or family gift, and/or address business interests or other significant assets.
What are the legal requirements?
A Contracting Out Agreement must meet specific legal requirements to be enforceable. Generally:
- The agreement must be in writing and signed by both partners.
- Each partner must receive independent legal advice before signing.
- Each partner’s signature must be witnessed by their lawyer.
- The lawyer witnessing the signature must certify that they have explained the effect and implications of the agreement to their client before it is signed.
If these requirements are not met, the agreement will not be valid, and the default rules under the Act will apply instead. This means a couple cannot simply download a template, sign it together, and assume they have opted out of the Act.
Before you sign, think about these issues
Buying a home together is exciting, but it is also a significant financial commitment. Before signing a sale and purchase agreement, we recommend that couples think through the following.
1. Where the money is coming from
- Whether one person is providing most or all of the deposit
- Whether parents or other family members are contributing money, and whether that money is a gift or a loan
- Whether one partner will carry a greater share of the mortgage
- Whether those contributions are intended to be protected
2. How the property will be owned
The property may be owned as joint tenants, tenants in common, or through another structure such as a trust. The right structure depends on your circumstances and should be considered alongside your wider estate planning and relationship property arrangements.
3. What should happen if the relationship ends
This can feel uncomfortable to discuss when you are excited about buying a new home, but it is far easier to agree on these things while you are getting along than after you have separated. Points worth considering include:
- What should happen to the deposit
- How any equity in the property will be divided
- What happens if one partner wants to keep the house
- How improvements or later contributions should be treated
- What happens to an inheritance or family contribution used towards the property
- What happens if one partner stops working to care for children
A Contracting Out Agreement is not about planning for a relationship to fail. It is about making sure both partners understand their financial position and have agreed how their property should be treated if circumstances change, particularly where contributions are unequal or one partner has brought significant property into the relationship. The best time to have that conversation is before the money is contributed, before the property is purchased, and before a disagreement arises.
If you decide an agreement is right for you, each partner will need independent legal advice before signing, and your arrangements should be reviewed as your circumstances change rather than treated as fixed.
If you are buying a home together, have unequal financial contributions, have received an inheritance, or simply want greater certainty about how your property will be treated, our family law team can help you understand your options and put appropriate arrangements in place.
