When relationships break up, former spouses or de facto partners will often find themselves at war over who gets to keep the family home and business, the much-loved pet, the car, and of course shares or cash assets.
The Property (Relationships) Act 1976 (“the Act”) contains rules as to how relationship property is to be divided. Generally, relationship property division rules apply to persons in either a marriage, civil union or de facto relationship of over three years’ duration. Whether the parties are actually in a relationship can be an issue. Determining whether a relationship exists depends on the particular set of facts. A list of factors set out in the Act assists to decide whether there is a relationship or not. One of the factors is a “degree of commitment to a shared life”, which can be shown by shared finances, sleeping together, becoming engaged, or the public aspects of the relationship.
The two following examples help to illustrate this. In one case, the Court found that although the parties lived in separate houses there was still a commitment to a shared life and therefore a relationship existed. In another case, the Court found that parties who had lived together for 20 years were not in a relationship as defined by the Act because one of the parties had a long standing affair and a child with someone else whom he helped raise, which showed a lack of commitment to a shared life.
So what exactly is relationship property? The family home, the car and household furniture and appliances are all relationship property. Relationship property also includes all property acquired during the relationship, that acquired before the relationship but in contemplation of the relationship, and that intended for common use. The Act states that relationship property is to be shared equally between the parties. The only exception to this is where one party can show that equal sharing would be unacceptably unfair.
Some property is not relationship property and is called separate property. A gift intended specifically for one person only, whether from a third person, as inheritance, or from a Trust (for example) is not relationship property unless it has been so mixed with other relationship property that it cannot be separated. Separate property is not divided on separation of a relationship.
At any time, parties can contract out of the rules created by the Act. To do so, the parties must enter into an Agreement in writing that specifies which property is to be regarded as relationship property or separate property. These Agreements are perhaps more commonly known as “Pre-Nups”. They also must contain other complex requirements and it is therefore advisable that lawyers are involved to ensure the Agreement is not null and void. The purpose of these Agreements is not necessarily to cut one party out of a wealth of property but to protect both parties’ interests should the relationship ever falter.
The existence of other entities such as Family Trusts and businesses can make dividing relationship property complicated. The law in this area is changing rapidly and up to date legal advice is desirable. Even in death, the Act can still apply and a surviving partner who may not have been provided for in the deceased’s Will could have a Family Protection Act claim against the deceased’s estate. One way of preventing such a claim would be to ensure that an Agreement has been entered into as outlined above.
If there is any doubt in your mind as to the status of your property or what you wish to happen should your relationship ever falter, please contact a lawyer for advice.