Separation agreements and division of relationship property

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Certain legal requirements must be met for a separation agreement to be binding.

One of those requirements is for both parties to receive independent legal advice and have the effects and implications of the agreement explained to them. Both parties must receive an explanation of what they would have been entitled to under the Property (Relationships) Act 1976 (“Act”). That means you must both use a lawyer and the lawyers must not work at the same law firm.

Generally one lawyer will draft the agreement and send it to the other lawyer for consideration and for amending where necessary. Once an agreement is reached each spouse will sign it in front of a lawyer who will certify that they have provided the appropriate legal advice. If the relationship is amicable and the agreement is simple, cost may be reduced by one spouse using a community law centre such as the One Double Five Community Law Centre in Whangarei – phone 0800 155LAW.

In the separation agreement you will agree on the status, division and distribution of all relationship property. The Act defines “relationship property” as including some of the following things (subject to some exceptions):

  • The family home (whenever it was acquired)
  • The family chattels (whenever they were acquired)
  • All property owned jointly or in common in equal shares by the spouses
  • All property owned by either spouse immediately before their relationship began, if—
  • the property was acquired in contemplation of the relationship; and
  • the property was intended for the common use or common benefit of both spouses; and
  • all property acquired by either spouse after their relationship began; and
  • all property acquired, after the relationship began, for the common use or common benefit of both spouses.

As you can see, it is possible for separate property to become relationship property.

Property held in the sole name of one spouse may be classed as relationship property. For example, shares held in the husband sole name are likely to be classed as relationship property if the husband acquired the shares or started the company during the term of the relationship. That means the wife will be entitled to share in the value of the shares.

Normally, relationship property is divided equally between the spouses. But the spouses may agree to the status of the property i.e. whether or not it is relationship property; and to the division and distribution of the relationship property i.e. who gets what.

It is important to get valuations of the property involved. Valuations should be obtained as soon as possible especially for property that can rapidly change value. It is difficult for a lawyer to explain a separation agreement to you if they do not know the value of all the relationship property. In particular, the lawyer will not be able to advise you of what you would be entitled to until the Act. They will not know what amounts to an equal split. Without valuations you may be giving up your entitlement to a large amount of money.

It is unlikely that a lawyer would advise either spouse to sign an agreement without knowing what the relationship property is worth. However, having received the legal advice, each spouse is entitled to make his or her own decision about whether to sign the agreement.

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