The division of relationship property

Relationships these days can take many different forms: marriage and civil partnerships (either for the first time or later unions), co-habiting partners, casual partners, long distance relationships, relationships based on companionship, relationships split between each other’s homes and so on. These are just some of the types of relationship which people can experience. Further, more and more commonly people are entering into relationships later in life when they have built up their own assets.

With any relationship it is important to understand how it can affect your property rights. For many an agreement which sets out how assets ought to be divided should the relationship end (either via separation or death) is seen as a “romance killer” or unnecessary. Others may not see their relationship as being sufficiently serious to consider an agreement (commonly referred to as a “prenuptial agreement”) because they are under the mistaken impression that their assets are not affected by their relationship.

However, many are surprised to learn that, even if the division of the assets they regard as their own is set out in a will, upon their death their will might be challenged if there has been insufficient recognition of their partner’s rights. Another common mistake is the belief that because one person owns an asset in their own name their partner does not have an interest (and a possible claim) in it. I also see many clients concerned that the family home, even if it was acquired by one partner before the relationship began or by inheritance, gift or via a trust, is often subject to the rules relating to equal division.

The Property (Relationships) Act 1976 sets out the rules for how the property is divided when partners separate or when one of them dies. More recently amendments were made to the Act to extend its application to civil partnerships and de facto relationships. The core principle of the Act is that “relationship property” is divided equally between the couple. Married, civil union and de facto couples who have been together for at least three years are covered by the rules relating to equal shares. Shorter term marriages and civil unions are subject to different rules.

Identifying if there has been a marriage or a civil union is fairly straightforward but assessing whether a relationship is a de facto relationship in accordance with the Act is not necessarily so easy. A de facto relationship is defined as being between two persons over 18 years old (regardless of gender) who are “living together” as a couple and are not married to or in a civil union with each other.

Unfortunately the law is not very concise about what “living together” actually means. Under the Act and various cases, a couple do not necessarily have to share the same house to be regarded as being in a de facto relationship – the court has held a de facto relationship to exist even though for much of the relationship the parties lived in different countries.

In deciding whether 2 persons live together as a couple, all the circumstances of the relationship will be taken into account, including any of the following matters that are relevant in a particular case:

  • the duration of the relationship:
  • the nature and extent of common residence:
  • whether or not a sexual relationship exists:
  • the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties:
  • the ownership, use, and acquisition of property:
  • the degree of mutual commitment to a shared life:
  • the care and support of children:
  • the performance of household duties:
  • the reputation and public aspects of the relationship.

The Court can have regard to these circumstances but has discretion about how important each factor is.

Having an agreement setting out property ownership can give a couple in any form of relationship comfort. Such an agreement often sets out which property is identified as belonging to just one of the couple (for example, quite commonly this is will be a house, or an interest in a house, purchased prior to the start of the relationship); how future property will be defined and how property should be divided in the event the relationship ends (by separation or death).

If you are already in a marriage, civil union or de facto relationship you can still enter into such an arrangement. If you are contemplating marriage or a civil union or simply entering into a serious relationship I strongly advise you to get advice when it comes to contracting out of the Property (Relationships) Act 1976. You may find that obtaining legal advice now will save you time and money in the future.