Conclusion
If you are in a relationship or end up in a relationship, at some point your home will become relationship property. This means you need to be proactive and talk about what you and your partner’s expectations are regarding personal assets and joint assets. We appreciate this can be a scary and difficult conversation to have with someone you love however if you choose to do nothing and do not enter into a Prenuptial Agreement (known as a Contracting Out Agreement in NZ), any money from the sale of your home will likely be split 50:50.
I recently heard about Agreeable. If you require a legal document to record how your money has been spent to acquire a property, it may be worth looking into using Agreeable. Agreeable provides a cost-effective solution for couples who are buying property together. Agreeable offers fixed fees for Contracting Out Agreements.
What is the Property (Relationships) Act 1976 (the Act)?
The Act governs the division of property (Relationship Property) in the breakdown of a relationship. For relationships that last for three years or more, your home will generally be divided equally on separation.
What is Relationship Property and how does the Act affect you both?
Amongst other things listed here, a family home is defined as being Relationship Property under the Act. If you are currently in a relationship, this means when you become owners of the property it will, or at a later point, become Relationship Property and will be owned by you both 50:50.
For clarity, it does not matter how much money you have both contributed to the property because if you were to break up and needed to sell the property, the money left over from the sale would be split 50:50.
What are the benefits of a Contracting Out Agreement?
If you choose to enter into a Contracting Out Agreement, this means you can agree to split the leftover money in whatever manner you can both agree on. Please read this blog that summarises some of the standard methods people agree on to split any excess money.
You can also decide on the ownership of any other assets e.g. business, car, etc., and, in case of a breakup, how you can sell your property e.g. to the other person or on the open market. You will both need to get independent legal advice – at least one of you will need to go and see another lawyer.
HouseMe Legal’s Fixed Fee for your Agreed Services does not cover any Relationship Property advice or for drafting a Contracting Out Agreement. If you would like to agree on a different method (instead of 50:50) about how any leftover money from the sale of the property will be split, please let us know and we can refer you to someone who can help.
I am not currently in a relationship. What do I need to be aware of?
If you are not currently in a relationship, then the above information will give you a heads-up that if you do enter into a relationship, the property you own in your name only could become relationship property in the future. As mentioned above, if you do nothing, then the default position means that it is very likely any money from the sale of the Property will be split 50:50. Please contact me at a later date if you find yourself in this scenario.
Want to know more?
Check out our blogs:
Are you receiving money from your parents to buy a home and don’t know how to record it?
Relationship Property - Paying For a Home – What are your options?
