When does a relationship become "De Facto" in the eyes of the law?
When people think about dividing property after a relationship ends, they often assume that this only applies to couples who are married or in a civil union. In New Zealand, however, that is not the case. The law recognises that many couples choose not to formally marry but still build lives together in ways that create mutual rights and responsibilities under the law.
Under the Property (Relationships) Act 1976 (Act), de facto relationships are generally treated in the same way as marriages and civil union when it comes to dividing relationship property – provided certain criteria are met. This means that your assets may be affected by the end of a relationship even if you have never been married.
This article explores what constitutes a de facto relationship, the legal consequences that can flow from one, and how couples can take steps to plan ahead.
What is a De Facto Relationship?
The Act defines a de facto relationship as one between two people (whether same sex or different sex) who are both aged over 18 years and who “live together has a couple”. This definition recognises the reality of modern family life, where many people choose not to marry but still establish long-term, committed partnerships.
Importantly, many couples are in a de facto relationship without even realising it. Sharing a home, pooling finances, raising children together, or being generally perceived as a couple by others may be enough to trigger the protections (and obligations) of the Act.
How Courts Assess Whether a Relationship is De Facto
Because no two (2) relationships look the same, the law deliberately leaves flexibility in how de facto status is determined. Some relevant considerations include:
- Duration: How long a couple has lived together.
- Finances: Whether they share bank accounts, pay bills jointly, or contribute to household expenses.
- Property: Whether they own or rent property together, or whether one partner has moved into the other’s home.
- Daily life: How they divide household responsibilities, spend their leisure time, and present themselves as a couple.
- External perception: How family, friends, colleagues, and the wider community perceive the relationship.
It is possible to live in the same house as someone but not be in a de facto relationship, just as it is possible to maintain separate homes or bank accounts but still be in a de facto relationship. The assessment is holistic, not mechanical.
The Three-Year Rule
In general, the equal-sharing rules under the Act apply when a de facto relationship has lasted for at least three (3) years. Once that three-year mark is reached, the law assumes that both partners have made equal contributions to the relationship – whether financial, emotional, or practical – and that the fairest starting point is an equal division of relationship property.
- The family home (even if it was originally purchase by one partner before the relationship);
- Family chattels, such as furniture, vehicles, and household items;
- Joint bank accounts; and
- Other property acquired during the relationship for the couple’s common use or benefit.
Separate property, such as inheritances or gifts received by one partner, may remain outside the pool of relationship property. Although this can change if that property becomes intermingled with relationship assets or gets used for relationship purposes.
For many couples, the three-year rule can come as a surprise. A partner who entered the relationship with significant assets may find that, after three (3) years of living together, the family home and other property are now subject to equal division if the relationship ends.
Relationships of Less Then Three (3) Years
The Act also recognises that shorter relationships can create unfairness if they are simply disregarded.
Where a de facto relationship has lasted for less than three (3) years, the equal-sharing regime does not automatically apply. However, the court may still divide relationship property (sometimes equally, sometimes unequally) in situations where:
- The couple have a child together; or
- One partner has made substantial contributions (financial or otherwise) and serious injustice would result if property were not shared.
Why De Facto Status Matters
Being in a legally recognised de facto relationship has significant implications. If a couple in a legally de facto relationship separates, relationship property is generally divided equally. This applies even if one partner brought more assets into the relationship or contributed more financially.
For example, if one person owned the family home before the relationship, but it later became the couple’s shared home, the property is typically considered relationship property subject to equal division.
This can be particularly confronting for people who have worked hard to acquire assets before meeting their partner, or for families where one partner has significantly greater wealth.
Planning Ahead: Contracting Out Agreements
Couples who wish to make their own arrangements for how property will be divided can do so by entering into a Contracting Out Agreement (alternatively called a Section 21 Agreement and colloquially referred to as a kind of “pre-nuptial agreement”).
This is a formal agreement made in accordance with section 21 of the Act, that allows couples to contract out of the default equal-sharing rules. To be legally valid, both partners must:
- Receive independent legal advice from separate lawyers;
- Have the agreement witnessed and certified by their lawyer; and
- Ensure that the agreement is in writing and signed by both parties.
- People entering a new relationship who want to preserve assets for their children from a previous relationship;
- Business owners who want to protect company assets from relationship property claims;
- Couples where one partner has significantly more assets at the start of the relationship; and
- People receiving inheritances or family gifts who want to ensure those remain separate property.
By setting expectations clearly from the outset, couples can avoid misunderstandings and costly disputes in the event of separation.
De Facto Relationship and ChildrenThe existence of children in a relationship adds another layer of complexity. The Family Court gives particular weight to the care and support of children when assessing whether a de facto relationship exists, and when deciding how property should be divided.
Even when the relationship has lasted less than three (3) years, the presence of children can allow the equal-sharing rules to apply.
De Facto Relationships Estate Planning
De facto status is also highly relevant when one partner dies. If there is no valid will, the Administration Act 1969 governs how the deceased person’s estate is distributed. A de facto partner may have significant rights to inherit from the estate, usually ahead of other family members.
Even where a will exists, a de facto partner may be able to make a claim under the Family Protection Act 1955 if they believe they have not been adequately provided for. This underscores the importance of careful estate planning for people in de facto relationships.
It should be noted that the rights under the Act do not end on death. If a partner dies while in a de facto relationship, the surviving partner can still bring a claim for equal sharing of relationship property under the Act, which may be pursued in addition to any other claim against the deceased’s estate, unless a contracting out agreement limits or excludes such a claim.
Key Takeaways
- De facto relationships are legally recognised in New Zealand, with many of the same property consequences as marriage and civil unions.
- The three-year rule is the general threshold for equal sharing, but shorter relationships may still lead to property division in certain cases.
- Courts take a broad, common-sense approach to deciding whether a couple is “living together as a couple”.
- Couples can protect assets and set their own arrangements through a properly drafted and certified Contracting Out Agreement.
- De facto status affects not only property division on separation but also inheritance and estate planning rights.
Understanding how the law treats de facto relationships is crucial for anyone living with a partner in New Zealand. Whether you are entering a new relationship, already in a long-term partnership, or considering separation, the implications for your property and financial future can be significant.
Get in touch with the experienced team at MoranLaw if you would like advice on whether your relationship qualifies as de facto, how your property may be affected, or how to protect your assets through a Contracting Out Agreement. Our team can guide you through your options and ensure your interests are protected.
