De-facto Relationships - What they are and what they mean for you?

The Property (Relationships) Act 1976

When you enter a relationship it is an exciting time and things can often move quickly. While it can sometimes be an awkward conversation it is important that you consider the legal effects of the equal sharing rule under the Property (Relationships) Act 1976 (the Act) sooner rather than later. Don’t leave it to the end of your relationship when emotions and tensions are high.

The provisions of the Act set out how relationship property and separate property should be treated at the end of a relationship. It is commonly known that the Act applies to all relationships including married couples, civil union couples and de-facto couples whose relationship has lasted at least 3 years. In some cases that Act also applies to relationships of short duration (less than 3 years). 

De-Facto Relationships

If you are married or in a civil union the classification of your relationship is certain. Whether or not you are considered de-facto however can sometimes cause some confusion. The definition of a de-facto relationship is set out in the Act as two people who are aged 18 years and older and live together as a couple.

While the definition seems straight forward living together as a couple is not as straight forward as it seems.

The Act sets out a number of matters that are relevant in determining whether you live together as a couple including;

1. the duration of the relationship;
2. the nature and extent of common residence;
3. whether or not a sexual relationship exists;
4. the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties;
5. the ownership, use, and acquisition of property;
6. the degree of mutual commitment to a shared life;
7. the care and support of children;
8. the performance of household duties; and
9. the reputation and public aspects of the relationship.

When there is a disagreement about whether or not a de-facto relationship exists, the courts are able to determine this taking into account some but not necessarily all of the above factors. The courts have applied the above and determined in one case that friends and flatmates who ended up sleeping together and relied on each other emotionally, were in a de-facto relationship.

Another important fact to consider is the ownership of your property. Where an asset has been used or enjoyed for the benefit of the relationship the legal ownership being in one partner’s name does not protect it from a relationship property claim. The court often asked to determine the status of assets in relationship property disputes and just because an asset is only in your name, does not mean that your partner does not have an interest in it.

Understanding the nature of your relationship and the treatment of your assets by yourself and your partner will become very important in the event of a separation. The general rule of thumb once it has been established that your relationship was de-facto is that all relationship property is divided equally between each partner. Relationship Assets includes the family home, the increase in value of property acquired before the relationship, property acquired during the relationship, vehicles, household chattels, income and any assets that have been purchased or maintained by that income, Kiwi Saver and any other asset that has benefited or been used by the relationship in some way.

Protect Yourself! Contracting Out Agreement

If you are in a de-facto relationship, or think there is a possibility you might be, then we recommend that you enter into a section 21 Agreement that contracts out of the provisions of the Act, commonly referred to as a Contracting Out Agreement. A Contracting Out Agreement is a written agreement setting out how the de-facto couple’s assets and liabilities are to be divided in the event of their separation or death. The couple therefore contracts out of the general equal sharing rule under the Act.

A Contracting Out Agreement can be made at any time. This includes: upon entering a new relationship, during a relationship, or even sometimes at the end of the relationship. You may choose to enter a Contracting Out Agreement if you have a significant amount of assets more than your partner, or if you want to protect your assets for the future interest of your children.

To ensure that a Contracting Out Agreement is binding it is essential for each party to obtain independent legal advice before signing and that the solicitor witnessing their signature is able to certify that their client understood the agreement and understood the effect and implication of entering into such an agreement. To enable a solicitor to do this full disclosure of all assets must be made to all parties.

If you have any questions or concerns regarding the status of your relationship and assets, we recommend that you get in touch with our specialist lawyers to discuss your situation and concerns. Getting legal advice early is crucial in ensuring that your property is dealt with in the manner that you expect and your interest your property is protected if your relationship ends.  

You can contact our specialist team at DTI Lawyers by phone on 07 282 0174 or email us directly.