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Family Home and Relationship Property Claims

Monday 8 October 2018

It is a misconception of many that if the family home is in the name of one party, then the other party cannot claim against the home if the parties separate.

This misconception remains. I recently found some clients being caught out by that.

Often a home was purchased by one party. We will call her Mary. Mary bought the home with her savings and has been paying the mortgage. Mary met Peter and after a few months Peter moved in. Mary charges Peter rent. Mary believes that indicates the relationship is a rental arrangement and therefore relationship claims do not apply.

Under New Zealand relationship property laws, the relationship home is deemed to be relationship property. After the parties live together for three years, each party is entitled to share in the relationship property. Relationship property will be shared 50/50 if the parties split up. This is regardless of whether the home was bought before or during the relationship. It is also regardless of how much contribution each party made to the relationship home at the beginning or along the way.

The relationship home is treated significantly different than from any other asset in a relationship under NZ law. For other assets that a party brings to the relationship, it is possible to keep separate and be treated as “separate property”. Separate property is deemed separate i.e. not shared by the parties if there is a split. However, for the relationship home, it is not possible to do that. Accordingly, once the parties have lived together for three years, the presumption in law is that the parties will share equally in the home. That is the case unless there are “extraordinary circumstances” which makes it “repugnant to justice”.

This may give rise to the “gold digger” scenario. Let’s look at the above example. If say Mary has saved up and paid off the mortgage before Peter moved in, Peter is still entitled to 50% of the home if the parties have been together for more than 3 years, and then split. Mary may try to argue “extraordinary circumstances repugnant to justice”, but the threshold is very high. It is likely that Mary will lose a significant share in her home even if it is not half.

One should bear in mind that the law in this area was initially to protect women. Traditionally, the male earned the money, controlled the finances and often owned the assets. This rule ensured that the female is still entitled to 50% of the home despite not contributing financially to it.

Life has changed a lot since this law was first passed. Now the female often comes to the relationship with assets which require protection.

The main ways for Mary to protect the home would be to put the home in a Trust before any relationship. Once the relationship has started, it is best for the parties to enter into a contracting out agreement but that requires both parties to agree.

A contracting out agreement is in a lay person’s terms a “prenuptial agreement”. That was often entered into before the parties got married. However, the important line is now before the parties have lived together for 3 years. Mary and Peter need to sign such an agreement. Without that NZ law does not provide much protection to Mary who may have saved hard to buy the home in the first place.

On another note, parents who have gifted/lent money to their sons or daughters for buying a house should insist on their son or daughter getting legal advice if they have a partner moving in to that house. Otherwise they could find that part of their money going to a child’s partner if they separate.

You must always talk to a lawyer as to how to keep any property you bring to the relationship separate. If you intermingle the assets or funds with relationship property, or apply that for the joint benefit of the parties, you may find that it becomes relationship property. It will be shared by your partner if the two of you split.

Teresa Chan

8 October 2018

This article is for general use only. Advice should be sought for specific circumstances. Please consult Teresa Chan at Teresa Chan Law Limited, Level 3, Westpac Building, 106 George Street, Dunedin 9016, ph. 477 1069, or email teresa@tchanlaw.co.nz

KEYWORDS: Family Home, Relationship Property Claims
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