Couples will in future be well advised to sit down and fully discuss financial matters at an early stage in their relationships as far-reaching new property division laws take effect.
The Property (Relationships) Act will come into force on 1 February 2002. Couples can draw up agreements contracting out of the act from August 2001.
Married couples, de facto partners and same sex couples will all be covered by the new legislation, which has been 20 years in the making.
The new laws should lead to fairer property divisions and more certainty for people once they are understood by the public and initial court cases have spelled out details.
Auckland barrister Bronwen Klippel rejects claims by National’s justice spokesperson Tony Ryall that up to 80 per cent of cases will end up in court. She says, although there will be a bedding in period, the end result should in fact be greater certainty for people.
"If there is an educative process when the act is introduced, as I think there needs to be, there will be more certainty, at least on the basic principles. People will be forced at the outset of relationships to either address property issues or, if they don’t do so, it will be at their peril," she says.
"I don’t think that 80 per cent of cases will go to court, for many reasons. We can often sort things out by negotiation. People won’t have the resources to take cases to the Family Court, and I don’t think that level of uncertainty is created by the new act. I think that is political grandstanding."
So what will the new laws mean?
In future New Zealand’s 1.3 million married couples, 236,397 de facto couples and an unknown number of gay and lesbian couples will be covered by the same law when they separate.
The Matrimonial Property Act 1976, which remains in force at present, covers only married couples, despite a widespread belief in the community that de facto partners also have property rights after a three years relationship. In fact, anyone in a de facto relationship must at present take a case to court and seek to establish a constructive trust, a difficult, expensive and time-consuming exercise.
Under the new law, property will generally be divided 50/50 if people split after a relationship lasting three years or more. De facto couples will have to be aged 18 or over for the law to apply.
In deciding whether a de facto relationship exists, the court will look at whether a couples lives together, financial intermingling or independence, the care and support of children, sexual relationship, and the performance of household duties.
If the actions of one partner directly or indirectly increase the value of separate property held by the other person, the increase in value will be classed as relationship property.
The new law also deals with economic disparity. This typically involves the situation where one party –normally the mother- has worked in the home and brought up children. Under the current law she and the children generally experience a substantial drop in living standards after the end of the marriage, typically going on to a domestic purposes benefit and with the woman finding it difficult to re-enter the workforce after many years and with few marketable qualifications. Research demonstrates that, by contrast, the financial positions of separating men improve substantially.
In the majority of cases the most substantial asset of the relationship is not a physical one such as a house or a car, but future earning capacity, which until now has not been included in property divisions.
In such cases the courts will be able to award a lump sum payment from relationship property where there are likely to be significant future differences in incomes and living standards between the partners. This will safeguard the interests of children better than the current law, which pays lip service to children’s interest but in practice primarily emphasises a speedy property division so that people can go their separate ways.
Couples not wishing their property divisions to be dealt with by the act can contract out of it by drawing up their own agreements. A specimen agreement is expected to be prescribed by regulation to provide guidance. People will be required to seek independent legal advice before signing an agreement, as is currently required before matrimonial property agreements are signed.
If an agreement is grossly unfair it will be able to be overturned by the courts, as also happens at present under the Matrimonial Property Act. Typical cases are those where one party is pressured into signing an agreement shortly before a marriage or under threat that the relationship will end if the papers are not signed.
The new law will also apply when relationships are ended by death, which has not been the case until now.
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