On 1 February 2002 the Property (Relationships) Act 1976 heralded in new rules regarding parties’ rights to property on the breakdown of a relationship, or on death. After 15 years of operation it is now being reviewed.
Beginning on 24 May 2016 the Law Commission started reviewing the Act. The terms of reference are not exhaustive but their media release lists as a starting point 16 issues to be considered. At this stage the Commission is in the consultation process but expects to be reporting back by November 2018.
The Act has always had as its principle that relationship property, as defined by the Act, should be divided equally. Amongst other things the changes were an attempt to recognise and address inequalities that can develop over a relationship, and to claw back into the pool assets that had been put into trust to defeat what one person would otherwise share in. It also brought into the same set of rules de facto couples, same sex relationships and civil unions.
Unlike some other countries New Zealand put an “opt out law” in place. The Act permits that people can make their own rules and not be governed by the automatic sharing of relationship property, but they have to take active steps and certain formalities must be complied with. Thus people can order their own affairs and keep assets separate. In some other countries you chose to be governed by the law in place.
The terms of reference include how the Act deals with property owned by a company or trust and the powers of this Court in this area. Trusts have long been a part of the New Zealand estate planning landscape. They have been used for a variety of reasons but there is no doubt that they are at times used deliberately to get around what might otherwise be relationship property. Courts have made various attempts via the Act to attack such Trusts but the general feeling is that the Act has not achieved what it set out to do with its “trust busting” sections.
Another area for review are the adjustments for economic disparity contained in the Act. These are discretionary powers of the Court which allow them to compensate a party to a relationship for effectively negative impacts on their income earning capacity that have been brought about by the relationship. There are no nice easy guidelines in the Act as to when this arises, or how it should be compensated for. As a discretion the law has developed through cases. This makes it very difficult for lawyers to be able to give any clear indication to clients what their position might be.
With an increasingly mobile population issues are arising as to property owned overseas. This can be as to whether the appropriate forum to decide matters is New Zealand, or whether the New Zealand Courts can take into consideration overseas assets when dividing assets in New Zealand. The review is looking at cross border issues.
In their review the Commission is not only interested in how the Act is operating but in the impact it has, not only on the parties, but on the interests of children. With a recognition of today’s society they are also interested in how it applies to sequential relationships and blended families.
At a very basic level they are concerned with definitions, of property, relationship property and separate property, as well as how a de facto relationship is defined. It is very easy to identify when a marriage occurs, as you have a certificate, but the start of a de facto relationship is much harder to identify.
It is heartening that the law is being reviewed. Any recommendations to come out of that review are some way off. Until such time as that is completed and changes occur we are still working within the framework we have.
If you have any questions or would like to discuss your personal situation please get in touch with one of our expert relationship team today.
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