The law governing the division of property when a relationship ends is set to change, following a comprehensive review by the Law Commission of the Property (Relationships) Act 1976 (“the PRA”).Under the current law, the PRA applies if you have been married, in a de facto relationship or in a civil union of three years or more, although in certain circumstances it can apply sooner.
The general premise of the PRA is that, in the event a relationship ends (be that on separation, or death) all relationship property is shared equally, although this is subject to a number of exceptions.
The Law Commission has identified changes that it believes need to be made to ensure the regime better reflects the reasonable expectations of New Zealanders.
This article will set out some of the key changes proposed which may, potentially, be relevant to some of you in the future.
The Family home
Under the current law, in a marriage, de facto relationship or civil union of more than three years, the family home is automatically considered to be relationship property and subject to equal sharing.
Under the changes proposed, the family home will not necessarily be shared 50/50, particularly if one partner owned it prior to the start of the relationship. In that situation it is proposed that only the increase in value during the relationship would be subject to equal sharing.
The foundation of the PRA is the idea that couples should start afresh, free from financial ties from the other, as soon as practicable after their relationship ends.
The proposed changes include an “overarching obligation” on the courts to have regard to the best interests of any minor or dependent children, including a proposal that the parent who has day to day care of the child/children may have an automatic right to remain in the family home for a limited period.
Family Income Sharing Arrangement (FISA) proposal
Another significant proposal is to pool and share the parents’ incomes following separation through a Family Income Sharing Arrangement (“FISA”). The Commission proposes that in a relationship of 10 years or longer in circumstances where, during the relationship, one partner has given up their career or declined a career advancement opportunity to make a contribution to the relationship, or their spouse has been able to advance their career due to the contributions of their partner to the relationship, this may entitle them to share in a FISA.
It is proposed the amount and duration of a FISA would be determined by a formula equalising the partners’ incomes for a period of time that is approximately half the length of the relationship and up to a maximum of five years.
Presently, the jurisdiction of the Family Court to make orders in relation to trust-owned property is limited. Often, such matters can involve High Court proceedings which can be expensive and protracted for the parties involved.
Under the proposed changes the Family Court could have greater jurisdiction to make orders involving trust owned property.
The Law Commission recommends extending the courts’ powers to deal with litigants whose conduct in a case causes unnecessary delay and expense to the other partner.
The Future of the PRA
It is not yet known whether these proposals will be passed in Parliament or what the full extent of any changes may finally be.
The law governing the division of property in the event a relationship ends (be that on separation, or death) can be complex. This can also be a difficult time for the parties involved. Obtaining clear legal advice and sound practical advice early on so that you are able to make informed decisions is important.
If you would like further information concerning any of these matters, please feel free to contact any member of our family team.