Can separating couples unequally divide relationship property?

Under the Property (Relationships) Act, the general principle is that separating spouses are each entitled to half of all relationship property. However, the law does allow couples to contract out of the rule of equal division by signing a section 21 agreement (also called a contracting out agreement).

Without a contracting out agreement, it doesn’t matter who is the registered owner of a relationship property, because the other party is still entitled to get half of that property, even if his or her name is not on it.

The contracting out agreement allows the couple to decide how they want to divide the property between them. The contracting out agreement must be certified by each party’s lawyer in order to have legal effect.

However, it is possible to overturn a poorly drafted contracting out agreement later in Court. If the court decides to set aside the agreement, then the relationship property will be divided as if the contracting out agreement was never signed.

The contracting agreement may be invalid if proper process was not followed when it was first entered into. For example, if one party did not receive independent legal advice before signing, then the contract will be voided.

Even if the agreement was signed through a proper process, the agreement could still be set aside years later if the content of the agreement would cause “serious injustice”. For example, a contracting out agreement that gave a homemaker minimal financial resources may be regarded as unfair by the courts and set aside.

Speak to us at Capstone Law if you have any questions about New Zealand relationship property law, we would be happy to assist you.