One who is buying his first property with a partner and participation may not exist on equal basis. They might be on a second relationship and carrying vital assets with them. Or they may be in a long term relationship but both individuals want to set out who possesses what to evade problems down the track.
Relationship Property and Separate Property
The Property (Relationships) Act 1976 (“the Act”) states that Relationship property is directed to equal sharing and separate property is referred to just one of the members.
For instance, people are usually surprised to discover that their Kiwi Saver balances are considered relationship property. This signifies that they are subject to equal distribution, as are their wages or salary. If one party has preserved some of their earnings in a separate bank account, it is likely that money is relationship property too.
Legacies are separate property if they are kept isolated from relationship property. Still, if inheritance is assigned towards a relationship asset (such as the family home) or is merged with other property, then it loses its standing as separate property. Enter into a Contracting out Agreement in order to protect the separate status of the inheritance.
Contracting out Agreement
A Contracting out Agreement values out each partner’s individual separate property. The parties can determine jointly which item is considered separate property. For instance, their individual Kiwi Saver balances, earnings, estates, ornaments, shares, and investments in their individual name, their profits under a family trust, and certain items of furniture, etc. The contract also sets out relationship property. This generally includes the family home and the furniture and chattels in that home.
In order for the contract to be joining, both parties to the agreement must experience independent legal opinion. The lawyers direct each party must follow the value of the assets that are the matter of the contract and execute their commitments under the Act.
Both parties must thoroughly show all assets and debts in order for a Contracting out Agreement to be bind. Neither companion must be under any pressure. You cannot force someone to sign such an agreement. These involve denying to get married or endangering to leave the relationship if they do not sign. The agreement can be set aside and is of no use if compulsion is applied, or it is observed to be invalid due to non-disclosure.
Adding review clause in agreement is a good approach to provide for varying circumstances. For triggering a review, set out a time period or an event, such as completion of job term. If the agreement is not examined at that time or alterations cannot be agreed, then the original agreement will be considered valid.
Contracting out agreement distinguishes separate property and relationship property if both parties in your relationship are keen to have this transparency, our experts would happy to help. Our relationship property lawyer will protect your interests every step of the way, as well as represent you in court if any dispute goes to trial.