Relationship Property - Contracting Out Agreements vs Property Sharing Agreements: What’s the difference?

When couples or co-owners decide to formalise how they will own, divide, or protect property, two common tools in New Zealand law often come up: Contracting Out Agreements (also called a section 21 Agreement and colloquially referred to as a kind of “pre-nuptial agreement”) and Property Sharing Agreements.

Although they both deal with property arrangements, they arise from very different legal contexts and serve distinct purposes. Understanding the differences is critical – both for protecting your assets and for ensuring your agreement is legally enforceable.

Contracting Out Agreements: Relationship Property under the Property (Relationships) Act 1976
A Contracting Out Agreement is a formal agreement under section 21 of the Property (Relationships) Act 1976 (PRA). It allows couples who are in a qualifying relationship – whether already married, in a civil union, or in a de facto relationship – to opt out of the default relationship property rules.

Why they matter
The PRA generally provides for equal sharing of relationship property once a relationship crosses the legal threshold (three (3) years, or earlier in some cases).

Without a Contracting Out Agreement, property such as the family home, vehicles, or other assets acquired during the relationship will usually be divided equally between the spouses / partners if the relationship ends - regardless of who purchased the property / asset.

Many couples use these agreements to protect assets brought into a relationship, safeguard inheritances or gifts (e.g. funds provided by one partner’s parents / family member to purchase a main home), or ensure fairness in blended family situations.

Key requirements

• Must be in writing and signed by both parties. 

• Each party must receive independent legal advice from a different lawyer. 
• Each lawyer must witness the party’s signature and certify that they have explained the effects and implications of the agreement.

Without meeting these requirements, the agreement is not enforceable.

Property Sharing Agreements: Co-Ownership without a Relationship Context
A Property Sharing Agreement is different. These are not governed by the PRA, but instead by general contract and property law (such as the Property Law Act 2007).

They are commonly used when two or more people purchase property together, for example: 

• Friends pooling resources to purchase a first property.

• Family members (siblings, parents and adult children) co-investing in real estate.
• Business partners purchasing a property as part of a joint venture.

What they cover
 A Property Sharing Agreement can set out: 

• Each person's ownership interest (e.g. 60-40, etc) which may or may not be reflected as such on the title to the property.

• How mortgage payments, rates, and expenses will be divided.
• Exit mechanisms if one co-owner wants to sell. 
• Dispute resolution processes to avoid costly litigation. 
• Arrangements around occupation and use of the property (e.g. who lives there, how and who rents it out – either the entire house or a co-owner’s room). 

Unlike a Contracting Out Agreement, there is no statutory requirement for independent legal advice, but it is strongly recommended.

Comparing the Two

Where they can overlap
In some cases, both agreements might be relevant. For example,

A couple in a de facto relationship buy a house together with a mutual friend. A Property Sharing Agreement could be used to set out the division of ownership between the parties, how the property might be sold in the future (including any preferential purchase rights of the parties), and the shared obligations and responsibilities on the use and management of the home. While a Contracting Out Agreement ensures the couple agree on how their share of the home will be treated under the PRA.

Used together, these agreements provide both clarity of ownership and relationship property protection.

Final Thoughts
While Contracting Out Agreements and Property Sharing Agreements both deal with property, they address very difference situations – one is about relationship property law, while the other is about co-ownership arrangements without an intimate relationship context.

If you are entering into a relationship where you want to protect assets, or if you are purchasing property with someone else, the right agreement can save significant conflict, cost, and uncertainty in the future.

Because the legal and personal stakes are high, it is essential to obtain tailored legal advice before signing either type of agreement, to ensure that the arrangements you are making will provide the protections you seek. Get in touch with the For Families Team at MoranLaw for guidance and advice.