It's all about relationship - property that is



Dividing property when a relationship ends is often a challenging task and one which typically comes at a time of emotional upheaval.  It also means both partners will generally be worse off financially, because the resources that had been used to support one household now need to be divided to support two.

The Property (Relationships) Act 1976 (PRA) sets out the rules for how property is to be divided when people separate.  Recently the Law Commission proposed changes to reform the PRA under what they call “The Preferred Approach”.  While no changes to the law have been made at present, there are several important changes now being talked about.

A relationship that qualifies for inclusion under the main PRA rules will include all marriages, civil unions and de facto relationships of three years or more or that involve a child.  It's now proposed that the current rules for short-term relationships be removed and the same rules for division of property as those for other longer term relationships apply.

There are a number of other proposed changes, but those that have drawn the most attention are, firstly, the presumption of automatic 50/50 sharing of the family home will not apply in all situations.  This is especially so if the family home was purchased by one partner prior to the relationship.  It may soon be that only the increase in value of the home during the relationship is shared equally.  Homes bought during the relationship however look like they will still be shared equally.  It has also been proposed that temporary occupation of the family home being given to the primary caregiver if there are dependent or minor children will be specifically provided for in law.

Secondly, a new Family Income Sharing Arrangement (FISA) is proposed for relationships of 10 years or more, or to relationships with children.  The FISA is intended to address the economic disadvantages from the parties’ roles during the relationship so that income can be shared fairly in the early stages of separation.  Under a FISA, partners to the relationship would be required to share part of their income for a limited period of time following a separation.  The period of time may vary, but it will be capped at five years.  The FISA payment would also be calculated by a specified formula.

Thirdly, the court is to have greater powers to share property held in trusts if the trust property was produced, preserved or enhanced by the relationship.  This is important for all of you who have assets held in family and other trusts.  This ownership structure should be revised by you.  

Overall, it is still intended that relationship property be divided equally between partners, subject to some exceptions.   The proposed law changes to the PRA are said to promote a just and efficient resolution process so as to make separation easier and more cost effective for all parties.  

Parties will still have the option to contract out of the PRA at the start or any time during their relationship. 

We are happy to assist with any questions you may have about this, and we underline that the proposals will affect many of our clients if they come into law.  

Call Gemma Smith to discuss the above on 03 327 8159 or email Gemma.