Young Hunter Separation Relationship Property

One of you or both of you have decided to separate

This is a brief explanation of your legal position in respect of your property. I will address the topic of children in a future article. 

To keep the explanation simple, I am going to assume that the relationship has lasted at least three years – different rules apply when the relationship has lasted less than three years. 

The steps are:

  • Work out the separation date
  • Classify the property as relationship property or separate property
  • Work out the value of the relationship property
  • Classify debts as relationship debts or personal debts
  • Work out the amounts of relationship debts or personal debts
  • Determine if any adjustments should be made for post-separation contributions

 

Separation date

The separation date (when the couple stops living like a couple) is used to “freeze” the property owned and debts on a particular day to work out what are relationship property and relationship debts.

Property bought after separation is usually not relationship property. For example, buying a car after the relationship has ended. If money from the relationship is used, then the money is relationship property but not the car.   

 

Relationship property or separate property?

In another blog article I explain the difference between separate property and relationship property.

 

Value of relationship property

Once we know what is relationship property, then we work out the value. My approach is to focus on the more valuable property first and work down the list to the least valuable property. It usually doesn’t make sense to waste a client’s money by lengthy arguments over items that don’t have much value.

For most people their most valuable asset is their home. Usually, the property is sold to someone else or transferred to one of the parties. In the latter case, the value is agreed between the parties, with or without a registered valuation.

For most other assets, e.g. cars and other chattels, the value is the second hand value, or what I refer to as the “Trade Me” value. What was paid for the asset, unless recently bought secondhand, is usually irrelevant. 

 

Debts

Debts are either relationship debts or personal debts. 

The practical difference between the two kinds of debts is that a relationship debt is paid out of relationship property before the net relationship property is divided.  With a personal debt, only the person that incurred the debt is liable for it. 

Relationship debts are usually debts that are connected to the joint relationship, e.g. household purchases, a mortgage loan for the family home, a bank loan to purchase a car etc.

As the name implies, a personal debt is personal to the partner. Examples of personal debts are a mortgage loan for a house owned before the relationship began or personal expenditure on a joint account after the relationship ended. 

 

Post-separation adjustments

Post-separation adjustments are used to compensate for either a benefit enjoyed out of the relationship property or for contributions to the relationship property after separation. 

A common example of a post-separation contribution is that one partner moves out of the family home and the other partner remains. The partner that has moved out continues to pay the mortgage, rates and insurance for the family home, with or without a contribution from the partner in the house.  Depending on the circumstances, the partner in the house may have received a benefit, i.e. cheaper “rent”, while the person out of the house also has to pay rent. All things being equal, this can be unfair and the Act has a mechanism to equalize up the payments made. Nevertheless, this is usually not a precise calculation but instead a broad brush approach to give some compensation to the party who is out of pocket.

 

Relationship property agreement

After there is agreement, you enter into a written agreement with your partner to agree how the relationship property will be divided. This is a full and final settlement of all disputes. A lawyer for each of you witnesses the agreement and explains the meaning and effect of it. The lawyers must be independent of each other, in other words, they cannot be in the same firm. 

 

Conclusion

The end of a relationship can be a difficult time. We will be delighted to assist you to make it as stress free as we can.

 

Please contact:

Clinton Light, Associate at Young Hunter

cl@younghunter.co.nz, 03 379 3880

 

Steph Gifford, Associate at Young Hunter

sjg@younghunter.co.nz03 379 3880