So, you are recently engaged – congratulations! This one is for you.
As exciting as this new journey is, it is crucial to take a moment and consider the legal aspects of your relationship and what is available to you to safe-guard yourself and the assets you have accumulated prior to the relationship.
Thanks to Hollywood, you may be familiar with the term “prenup”. In New Zealand, that is more commonly referred to as a contracting out agreement. This agreement can be entered into at any time during a relationship but is most commonly considered when purchasing a home together, or entering into a marriage.
Contracting out agreements, pursuant to section 21 of the Property (Relationships) Act 1976, allow qualifying relationships to contract out of the provisions of the Act (which by default, presume a 50/50 split of all relationship property) and form their own agreement in writing. The requirements for such an agreement to be binding at law are contained in section 21F of the Act and are:
a) The agreement must be in writing and signed by both parties.
b) Each party to the agreement must have independent legal advice before signing the agreement.
c) The signature of each party to the agreement must be witnessed by a lawyer.
d) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
There are two types of property when considering this type of agreement - “separate property” or “relationship property”. You will need to agree on what falls into each of those categories. Separate property follows a general rule that if your relationship were to end, any separate property would not need to be divided, as it remains your separate property. An example of separate property could be property owned prior to entering into the relationship that has not been intermingled, or family heirlooms. Relationship property is what must be divided when the relationship ends. Examples of this can be the family home, furniture purchased together, savings or debt in your joint names, vehicles, and even pets.
When considering a contracting out agreement, it is crucial that you are both fully informed, appropriate disclosure of all assets is made to one another, and it is not forced upon any of the parties. A contracting out agreement can be your best bet for a legally binding way to protect your property, especially for blended families. Planning in advance while things are amicable makes things a lot smoother down the track should the relationship come to an end, and aide in avoiding the necessity for a Court order, or the risk of a grueling and potentially expensive negotiation stage.
Being aware of your legal rights coupled with professional advice assists you with that secure future knowing an agreement is in place. In saying that, it is very important to keep a contracting out agreement up to date as time goes on as naturally you will accumulate assets over time and circumstances can change. If you are considering putting a contracting out agreement in place, please do not hesitate to reach out to our team.