Exceptions to equal sharing of relationship property

There is a presumption in the law under the Property (Relationships) Act 1976 that upon separating with your partner or spouse all of your relationship property will be equally divided.

This presumption will apply unless you and your partner or spouse have entered into a contracting out agreement ("prenuptial agreement" or "premarital agreement") and you have outlined, on your own terms, how you would like your property divided upon separation or death.

However, if there are extraordinary circumstances the court may consider that equally dividing relationship property is repugnant to justice, which may lead to the court ordering an unequal division of relationship property.

What is relationship property?

Relationship property has a wide ranging definition and includes:

• The family home, regardless of who bought the home or whether it was acquired before the relationship started
• Family chattels, such as vehicles, furniture and pets, even if they are in only one party's name
• Any other jointly-owned property
• Shares, investments, superannuation and KiwiSaver
• Income earned during the relationship
• Relationship debt, which includes debt incurred by one party if it was for the benefit of the relationship
• Property owned by one party prior to the relationship that is acquired in contemplation of the relationship and intended for the common use and benefit of both partners
• Property acquired after the relationship began out of pre-relationship separate property but for the common use and benefit of both partners

Exceptions to the presumption of equal sharing – Extraordinary circumstances

An exception to the equal sharing of relationship property is the existence of extraordinary circumstances that make equal sharing of property repugnant to justice.  If the court finds that there are extraordinary circumstances, the court has the discretion to order that each party's share in the relationship property is determined in accordance with each of their contributions to the marriage, civil union, or de facto relationship.  If no extraordinary circumstances exist or if the court does not think that equal sharing would be repugnant to justice then the presumption of equal sharing of relationship property applies.

While there is no definition of "extraordinary circumstances" in the Property (Relationships) Act 1976, there are multiple factors that are often cited as being extraordinary.  Relevant factors which the court takes into account when assessing if extraordinary circumstances exist include:

• Disparity of financial and non-financial contributions by each party to a relationship
• Source of financial contributions and proximity to the date the relationship ended
• Duration of the parties' relationship
• A significant age disparity between the parties
• Whether one party has limited future earning capacity

It is often a combination of the above factors that lead to the existence of extraordinary circumstances.  The most invoked argument for extraordinary circumstances has been where there are very large differences in the amount of capital or property brought into the relationship by each party.

Conclusion

If you are coming into a relationship with a significant amount of wealth, or putting more money than your partner into property, it is always best to enter into a contracting out agreement so that you can set out how you want your property divided upon separation or death.  Contracting out agreements need to be reviewed periodically to ensure they remain fair and account for changes in circumstances such as children, inheritance or increased wealth.

If you are separating with your partner and believe that a 50/50 equal split of your relationship property would not be fair, consider seeking legal advice to discuss your circumstances.  Alternatively, if you and your partner entered into a contracting out agreement but due to changing circumstances you believe the agreement is no longer fair, you should consider seeking legal advice to have this reviewed.
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