Relationships are an integral part of human life but there are some relationships that can go sour causing hardships to everyone involved.
It is important to consider the effects of Property (Relationships) Act (PRA) when a relationship ends. It is critical that people who have chosen not to marry or enter a civil union, check with their lawyers to see how this law affects such arrangements.
Relationship under PRA
PRA came into force on February 1, 2002.
The Act presumes that each partner contributes equally to their relationship, even though such contribution may be in different ways.
The legislation aims to provide an equal division of relationship property when the relationship ends or when one partner dies.
The PRA automatically applies to all married and civil union couples and those who have been living together in a de facto situation for a minimum of three years. Even if you are not married or living together, the Act may apply.
The PRA applies whether a relationship ends through separation or death but most people do not realise that it can override the provisions of a deceased partner’s Will.
What if your relationship is less than three years?
The rules for dividing property when a relationship is of short duration (less than three years) are different for married and civil union couples from those of de-facto couples.
When a marriage or civil union ends through separation, property is generally divided based on contributions to the relationship rather than shared equally when one spouse’s contribution is clearly greater than that of the other.
If the marriage or civil union (even if very brief) is ended by death, it will be treated as a marriage or civil union of long duration (over three years).
In contrast, if a de-facto relationship is of less than three years, then an order dividing property under the PRA cannot be (usually) made.
What happens if an equal division of property means one partner is left much worse off than the other?
Where there is significant economic disparity between the partners after separation and that disparity is caused by the division of functions during the relationship, the court may decide that the partner left at an economic disadvantage should get more than half the relationship property.
For instance, consider that a wife has left her highly paid career for many years to look after the household and children with the support of her highly paid husband’s career growth. It is possible that after the relationship ends, she would have difficulty in re-entering the job market and sustaining her current life style.
The argument here is that she should be entitled to more than 50% of the relationship property.
It is important to remember that a larger share will come out of a property accumulated during the relationship and not out of the other partner’s future earnings. The court would consider the situation case by case; the fact that one partner earns more than the other is not enough to claim economic disparity.
Couples keen on preventing the effects of PRA may enter a Contracting-Out Agreement. This allows people to make their own rules about the ownership of the property (including future property) and how it is to be divided when the relationship ends.
There are strict legal requirements in drafting and entering a valid Contracting-Out Agreement. It is therefore imperative that you seek expert legal advice.
It is also important that partners in a relationship openly and freely discuss all aspects at the beginning of a new relationship.
As English Philosopher John Locke said, “Where there is no property, there is no injustice.”
Farah Khan is Partner & Notary Public Practice Manager at Khan & Associates Lawyers and Notary Public based in Papatoetoe, Auckland. She can be contacted on (09) 2789361. Facebook: Farahkhanlawyer.