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Relationship Property – are your circumstances extraordinary?

06 September 2019

The Facts

Jane and Steve began a relationship in April 2016 and have no children. Jane owned a house and they agreed they would both live there.  In November 2018 Jane received a large inheritance pay-out and used $200,000 of this to pay off the mortgage on the house.  Jane and Steve separated in January 2019 and they now want to divide their relationship property.

The Issue

Under the Property (Relationships) Act 1976 (“PRA”), the presumption is that after a couple have been together for three years or more, relationship property, including the relationship home, should be divided equally between parties. This doesn’t seem fair to Jane as she has contributed almost the whole house and the mortgage repayments to the relationship.  One option available to Jane is to apply under section 13 of the PRA to divide the relationship property unequally.

The Law

Section 13 of the PRA allows the court to divide property unequally if the following can be proved:

  1. Are there extraordinary circumstances in the relationship?
  2. Do these circumstances make equal sharing unfair?
  3. What should the division of property be after considering these circumstances?

Although successful claims under section 13 have been uncommon, because they are difficult to prove, recent decisions have shown that they are becoming more frequent.

Extraordinary Circumstances?

There is no simple answer to whether this situation is unfair and/or unacceptable.  There is no universal standard of what’s normal in a relationship so there’s no way of saying what goes past this.  What is clear is that the courts must ask whether this situation is so out of the ordinary that they simply could not allow the relationship property to be divided equally.

Does Jane’s claim meet the standard of section 13?

Examples of situations where successful section 13 claims have been made are:

  • Applying significant separate property to relationship property or debt, towards the end of the relationship
  • Nature and duration of the relationship
  • Gross disparity of contributions to the relationship

 

Jane is likely to win her claim because of the significant assets she has brought to a relatively short relationship. It would most likely be considered unfair if this was not recognised and Jane and John’s relationship property was divided equally. This situation could be different if Jane and John had been in a relationship for 23 years rather than 3 years and they had children.

Key Points

A successful claim under section 13 will involve a combination of circumstances which makes the situation extraordinary. The more extraordinary the circumstances, the higher the portion of the relationship property pool will be awarded to people like Jane.

Although there is an option under section 13 to go through the court, this can be a lengthy and expensive process. A Contracting Out Agreement is a useful way of recording any unequal contributions by one party to a relationship and dividing the property without resorting to the courts.

 

Jo Naidoo is a Partner of Norris Ward McKinnon, specialising in Family Disputes law. You can contact Jo at jo.naidoo@nwm.co.nz