What is considered Relationship Property in New Zealand?

When couples separate, one of the first questions and most pressing questions is: Who gets what?

In New Zealand, the Property (Relationship) Act 1976 (Act) sets out the rules for how property is classified and divided when a relationship ends. The law applies equally to married couples, civil union partners, and de facto partners who have lived together for at least three (3) years (with some exceptions for shorter relationships where there is a child or significant contributions).

While the Act is designed to promote fairness and equality, many people are surprised to learn what does, and does not, count as relationship property. Misunderstandings are common, particularly when partners have brought assets into the relationship at different stages, or when gifts and inheritances are involved.

This article provides a practical guide to understanding relationship property in New Zealand – how it is defined, how it differs from separate property, and what factors can change its classification.

Relationship Property vs Separate Property

The Act made a key distinction between relationship property (to be divided equally, unless extraordinary circumstances exist) and separate property (which usually remains with the individual owner).

Relationship Property
Under section 8 of the Act, relationship property generally includes:

• The family home: Regardless of who purchased it or when it was acquired; if it has been used as the couple’s principal residence, it is relationship property.
• Family chattels: These include household furniture, appliances, vehicles used primarily for family purposes, and even pets.
• Income earned during the relationship: Salaries, wages, or other earnings from employment or self-employment.
• Retirement savings growth: Contributions and increases to KiwiSaver, superannuation, or similar schemes during the relationship.
• Jointly acquired assets: Property purchased during the relationship, even if only one partner’s name appears on the title or account.
• Debts incurred for the benefit of the relationship: Such as a mortgage on the family home, or loans taken out for household expenses.

Separate Property
Separate property, under section 9 of the Act, typically covers:

• Pre-relationship assets: Property owned by one partner before the relationship began, so long as it has not been mingled with relationship property.
• Gifts and inheritances: Assets received by one partner from a third party, provided they have not been used for the benefit of both partners.
• Certain trust property: If a valid trust was established and assets placed into it before the relationship. However, trusts are increasingly scrutinised by the courts where they may defeat the intent of the Act.
• Compensation for personal injury: Payments made to compensate one partner for injury, provided that those payments have not been used for the benefit of the relationship.

However, separate property can lose its classification if it is intermingled with relationship property.

The Family Home: A Special Case

One of the most striking features of the Act is that the family home. Even if one partner purchased the home years before meeting their partner, if the couple later used it as their shared residence, it is classified as relationship property.

This rule reflects the view that the home is central to family life. Regardless of who paid for it or whose name is on the title, both partners have an equal interest in it once it becomes the family home.

The only way to preserve ownership in such a case is to have a valid Contracting Out Agreement, executed in accordance with the Act. Without such an agreement, the home will almost always be divided equally upon separation.

When Separate Property Becomes Relationship Property

It’s common for Separate Property to unintentionally transform into Relationship Property. This can happen gradually and sometimes without either partner realising. Some common scenarios include:

• Using separate funds to renovate the family home: For example, one partner sells a pre-relationship property and uses proceeds to renovate the couple’s shared home.
• Mixing inheritance funds with joint accounts: Once money is deposited into a joint account and used for family expenses, it is difficult to argue that it remains separate. 
• Transferring title into joint names: Adding a partner’s name to the title of a pre-owned home or investment property changes its classification.
•  Joint mortgage repayments: Where one partner brings a home into the relationship but the other contributes to the mortgage, the property may be deemed relationship property.

The longer the relationship lasts, generally the harder it becomes to keep property separate. Even if an asset was clearly one partners at the start, over time it can become subject to division if it has been integrated into the couple’s shared financial and domestic life.

Debts as Relationship Property

Many people are surprised to learn that debts can also be considered relationship property. Under the Act, debts incurred for the benefit of the relationship (such as loans for household items, mortgages, or family holidays) are generally shared equally.

However, debts that are clearly personal (such as gambling debts or personal fines) usually remain the responsibility of the individual who incurred them. That said, disputes often arise where one partner argues that a debt was taken for family purposes while the other disagrees.

Short Relationships: Different Rules

The Act generally applies to relationships lasting three (3) years or more. However, different rules apply to shorter relationships:

• Less than three (3) years: The equal sharing rule usually does not apply. Instead, property is divided according to each partner’s contribution, unless there is a child of the relationship or significant contributions were made.
• With Children or Significant Contributions: Even if a relationship is short, the court may apply the equal sharing rules to ensure fairness.

If you suspect you have contributed significantly to the relationship, and you are a relationship of short duration, it is important you seek legal advice on whether the PRA relationship division rules apply to your relationship.

Contracting Out Agreements

Partners who want to protect their own assets can enter into a Contracting Out Agreement under section 21 of the Act. This legally binding agreement allows couples to decide how property will be divided if they separate (including in the event of one partner passing away).

To be a valid agreement, each partner must receive independent legal advice, the lawyer providing the advice must certify to that effect, and the agreement must be in writing and signed by all parties (and witnessed by that lawyer). These agreements are increasingly common, particularly where one partner enters the relationship with significantly more assets, where there is a blended family situation, or where a partner has received assistance from their family to purchase a property.

Why Classification Matters

Understanding the distinction between relationship and separate property is critical, not just at the time of separation but also when planning for the future. Key reasons include:

• Estate Planning: Knowing how property will be treated helps in overall estate planning, including how to structure ownership of certain assets, drafting wills and setting up trusts.
• Asset Protection: Business owners and professionals may wish to protect their business assets that might inadvertently be considered relationship property.
• Fairness at Separation: Clear understanding with suitable written agreements (if appropriate) reduces disputes and litigation.
• Financial Planning: Couples can made informed decisions about buying property, saving, and investing together.

Final Thoughts

The Act plays a pivotal role in defining what counts as relationship property in New Zealand. While the Act aims to balance fairness and equity, its application often produces results that surprise people.

The most important takeaways are:

• The family home is relationship property, regardless of when and by whom it was purchased.
• Separate property can easily become relationship property if it is mixed with relationship assets or used for the benefit of the couple.
• Debts, as well as assets, can be divided between the couple.
• Contracting Out Agreements offer a practical way for couples to set their own rules for determining separate property and managing relationship property.

Every relationship is unique, and so is every property arrangement. That’s why professional advice is crucial. Whether you are moving in together, getting married, or facing separation, understanding the Act and obtaining professional guidance can help you avoid costly surprises.

Get in touch if you’d like tailored advice about your situation, our experienced team is here to help.