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New Property Sharing Regime A “Time-Bomb”

28 October 2001

New Property Sharing Regime A “Time-Bomb” Says Property Lawyer

Lawyers are going to have to be “on guard” and instinctively “wired in” to their clients’ needs to manage the risks and deliver the best outcomes once the new Property (Relationships) Act 1976 takes full effect from 1 February 2002, according to Wellington property lawyer John Greenwood.

Deputy chair of the Law Society’s Property Law Section Mr Greenwood said the new legislation – which applies to de facto, including same sex, couples - overrides existing presumptions of common law and equity and will apply to all transactions between couples. The Act will apply to de facto relationships of three years or more – or less in certain circumstances, such as where there are children of the relationship. The children may be those from a former relationship.

“The general public will now seriously need to contemplate with 20-20 vision their personal relationships as a type of commercial transaction. The new law will also likely have a big impact on the already overburdened family court, which could as a result lose its principal focus on the need to protect children.”

Mr Greenwood says lawyers are gearing up to absorb the impact of the legislation but says many uncertainties are already emerging about how to interpret the new law, which in many areas is unclear.

“The difficulty is that we have a code that is being imposed on the broad community. Yet in reality we’re talking about the complexity of human relationships and the need to deal not only with property in its broad sense but with emotional baggage and human frailty.”

Mr Greenwood says the presumption of equal sharing extends beyond domestic property to all property. That means every property transaction undertaken by couples will involve a consideration of the possible impacts of the new Act.

“Even where there is no existing relationship, people need to be alert to the impact of entering into a personal relationship later on. Innocent relationships may well be time-bombs waiting to happen.”

Trust busting features, income disparity rules – where the courts have the power to consider the economic disparity of the parties at the point of property division and award a greater than equal share to one party – and the factors determining when a personal relationship commences are going to present big challenges for the public and the lawyers who advise them, he says.

“Perhaps the biggest shock for most people will be the impact the legislation will have on their property at death. This is one of the most significant changes, yet until now there has been surprisingly little public comment. There is now a presumption that all property on death is relationship property. On the death of one partner a surviving partner has two options. The first option is to elect within 12 months of a partner’s death to apply under the Act for a division of that property, which will effectively revoke the deceased’s will. The second option is not to make an application under the Act but take as a beneficiary under the will or receive a beneficial interest under intestacy. If the first option is taken every gift in a will to the surviving partner will be revoked unless the will makes it clear that the deceased intended the other partner to take gifts even if an application under the Act occurs.

“The Act will demand that most de facto partners and those in second or subsequent marriages will need a contracting out ‘property sharing agreement’.”

Mr Greenwood predicts the impacts of the legislation will be huge for the legal profession as well as the public.

“I think most people need to seriously consider their personal circumstances, including any future situation they or their children might find themselves in. This legislation will touch anyone with any tangible property, whether on relationship break-up or death. Wills are effectively abrogated. People need to know that.”


For further information contact:
John Greenwood ph 04 498 4900 or 025 781 495
Or Rae Mazengarb ph 04 4727 837 or 021 334 095

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