New Zealand has changed significantly over the last half-century. The Property (Relationships) Act 1976 was drafted at a time when couples generally married young and pooled their resources to buy a house as early as they could, a time when ABBA’s ‘Fernando’ topped the national charts and Fred Dagg and Footrot Flats made Kiwis laugh out loud.
Our rampant housing market, online dating and cheaper travel opportunities are some of the factors that have changed how people engage with one another and when they decide to settle down.
The majority of people now wait until much later in life to commit to a relationship.
That means more instances of people bringing assets, property or financial savings into a relationship which need to be considered if the couple separates. It can also mean greater disparity in wealth and earning power between partners.
Adapting legislation to a 21st century New Zealand
Legislation should meet the needs and lifestyle of society. Given the significant changes to when and how we begin and end relationships, the Property (Relationships) Act needed to change to reflect our new ways of living together.
A review of the Act to help divide property fairly and protect family income sharing for the financially vulnerable was long overdue. The NZ Law Commission recently recommended significant changes to the Act to make the law fairer for partners dividing property and finances at the end of a relationship.
Dividing property more fairly
One of the Law Commission’s main areas of focus is to change how the family home is shared after a separation. Under the current law the family home automatically becomes relationship property just because it was used by the parties as such during their relationship.
That means, if the couple separates, the original homeowner is forced to divide the property equally with their ex with no regard for the fact that one of the parties may have owned the home prior to their relationship.
The Law Commission’s recommendation is to change this ruling to only reflect any increase in the value of the property while it is being used as a family home during their relationship. For example, a couple starts a relationship at a time when one partner owns a house worth $500,000. If the property increases in value during their relationship to say $750,000, before separating, only the $250,000 increase in value is considered as part of any settlement.
This is a welcome change which will protect homeowners from potentially losing their property when their relationship ends.
Property held on trust
The proposed amendments will also give the court greater powers to provide for a fair division of property when a trust is involved. The court will be able to get involved when the trust holds assets that were purchased, preserved or improved by the relationship.
Sharing family income to protect the vulnerable
Another major alteration proposed by the Law Commission is to introduce Family Income Sharing Arrangements (FISAs). This would require individuals with high earning power or significant personal savings to share income for a limited period following separation from their former partner to ensure the couple’s economic differences are balanced more fairly. This is in an effort to address how economic advantages and disadvantages are shared once parties separate. The current legislation on this has not been a success due to the difficulties in pursuing a successful claim and the inconsistent way in which the courts have dealt with claims of that type.
Children’s interests are also a focus to make sure they are given greater priority in the division of relationship property immediately after separation.
The Law Commission has also proposed a raft of administrative changes designed to streamline how relationship property matters are resolved. This aims to stamp out behaviour designed to deliberately delay proceedings, raise legal costs and force an ex-partner to settle out of court.
Fair is fair
The coming changes will undoubtedly be met with a sigh of relief from people on all sides of the courtroom. Financially vulnerable individuals will have more access to support and dividing ‘family property’ should more fairly reflect what assets are brought into the relationship before separation.
It is hoped that lawyers will also be able to offer clients more accurate guidance and better manage expectations once court decisions are based on clearer legislation rather than on a case-by-case basis.
