It’s been more than 40 years since New Zealand’s divorce laws were first set out and 18 years since those laws were last amended substantially, so it is unsurprising that many consider the Property (Relationships) Act 1976 to be unfair and out of date.
Life in New Zealand has changed a lot since the 1970’s. We now tend to live longer, our partnerships are shorter, and many of us having more than one significant partnership during our lifetime often forming them later in life. This means wealth is being brought into many relationships, rather than partners marrying early and creating wealth while they are together.
The current laws mean assets are split 50:50 if the parties have been together for three or more years, this is regardless of what each party brought into the relationship. In many situations this is not fair.
To address the inequalities arising under the law the Law Commission has reviewed the Act to see whether it still achieves a just division of property. They received feedback from members of the public and experts working in this area. The results were conclusive – changes were required.
The Law Commission have now finalised their recommendations and these were tabled in parliament on 23 July, 2019. The government will now decide whether these changes will be adopted.
The main changes are likely to be:
- Retention of wealth introduced to the relationship
There no longer will be an automatic 50:50 split when a relationship ends. Each party will keep the wealth they brought into the relationship. If one partner owned the family home before the relationship, only the increase in value during the relationship should be shared. However, if a couple buys a house together it will still be shared equally, regardless of the proportions each person contributed. Prenups will still be used if a couple does not want to be governed by the rules in the Property (Relationships) Act.
- Introduction of FISA’s – Family Income Sharing Arrangements
Couples who have children, have been together for 10 years or more, or who have built or sacrificed careers because of the relationship should be eligible for Family Income Sharing Arrangements or “FISAs”. Under a FISA, the partners would be required to share their combined income for a period after they separate, to ensure the economic advantages and disadvantages from the relationship are shared more fairly.
The laws in place now allow for compensation for the lower-earning partner, such as spousal support maintenance and s15 economic disparity claims. However, the legal costs associated with applying for these remedies are high and the awards are unpredictable. Having the FISA rules in place should make it easier to achieve a fair result.
- Greater powers to share trust property
Trusts will no longer provide easy protection for property that would otherwise be relationship property. The Court will have greater powers to share trust property that was produced, preserved or enhanced by the relationship.
- Children’s interests will be given priority
The New Zealand Family Court has a child-centred approach for care of children. However, this traditionally has not been a focus for relationship property matters. Children need to be considered from a financial perspective; particularly when one party takes primary care of the children or when finances are an issue. Under the new rules, children’s interests will become a primary consideration in relationship property settlements. The primary caregiver will have a default right to stay in the family home in the period immediately following separation. This provides some consistency for children, allowing them to stay at their existing school, to be around friends and in a familiar environment.
- Support for just and efficient outcomes in PRA matters
There will be a range of measures to promote the just and efficient resolution of PRA matters and to address behaviour that causes delay and increases costs. This includes will ensure partners properly disclose to each other all relevant information about their property, whether or not they go to court.
- Provide better information and personal advice
The Ministry of Justice will develop a comprehensive information guide for separating partners that explains the law and provides information about the different options for resolving PRA matters. The Law Commission recommends funding for community organisations to provide person to person support.
Most people agree the law changes will result in a fairer split of property and will welcome the greater priority placed on children in a separation.
However, just as important, will be the framework which enables couples to reach agreement under these laws in a quick and cost-effective manner.
At the moment, there is little support or resources available for separating couples. If they cannot agree on their relationship property, they are reliant on the Court process which is expensive, stressful, and takes at least a year to conclude.
What couples need is information about the law and their options that is easy to understand. They also need support as they negotiate a fair resolution.
The review of the Act addressed these issues of support and resources for separating couples. If this is delivered along with the changes to the law, it will have a valuable impact for New Zealanders.