Setting Aside Relationship Property Contracting Out Agreements

Why have a contracting out agreement?

Entering into a relationship property contracting out agreement ("prenuptial agreement" or "premarital agreement") allows couples to determine together how they would like their separate and shared property divided if separation or death occurs.

If a contracting out agreement is not entered into then the Property (Relationships) Act 1976 will automatically apply to a qualifying relationship and, in most cases, this will mean that all relationship property, such as the home lived in, will be equally split between both parties. The implications of the Act can sometimes lead to detrimental effects, for example where property is required to be equally split following separation even though it was bought prior to the relationship by one party.

Is a contracting out agreement final?

For a contracting out agreement to be legally enforceable, it must comply with the following legal requirements, otherwise it will be void:

• The agreement must be in writing and signed by both parties in the relationship

• Each party must have independent legal advice before signing the agreement

• The signature of each party must be witnessed by a lawyer

• The lawyer who witnesses the signature of a party must certify that they explained to that party the effect and implications of the agreement

However, in certain circumstances, such as where there is misrepresentation or undue influence, a contracting out agreement could also be void and have no effect.

Furthermore, if a contracting out agreement would cause serious injustice, the court may set the agreement aside. Factors which the court must have regard to when assessing whether a contracting out agreement would cause serious injustice include:

• The length of time since the agreement was made

• Whether the agreement was unfair or unreasonable at the time it was made

• Whether the agreement has now become unfair and unreasonable in light of any changes in circumstances

• Any other matter the court considers relevant

Going forward with contracting out agreements

As the court has the ability to set aside contracting out agreements which would cause serious injustice, it is vital that adequate legal advice surrounding these agreements is sought. Contracting out agreements should be carefully drafted, not unreasonable and reviewed when appropriate to consider any changes in circumstances to ensure they can withstand overtime.

For more information, please contact:

Peter Fuscic on (09) 306 6746 (pfuscic@mcveaghfleming.co.nz)

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Family Law & Relationship Property

Written by Peter Fuscic and Niamh Forgie