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substantially, so it is unsurprising that many consider the Property (Relationships) Act 1976 (PRA) to be unfair and out of date.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 have more than one significant partnership during our lifetime, often forming them later in life.
The Law Commission conducted a review of the PRA receiving feedback from members of the public and experts working in this area. Based on these findings, a report of 140 recommendations was tabled in parliament in July 2019.
The report didn't cover the rules applying to relationships that ended when one of the partners passed away (succession law) but recommended that these laws should also be reviewed. The government agreed and requested the Law Commission conduct this review in 2020.
The government have decided not to make any changes to the PRA without considering them in conjunction with changes to succession law, as they believe it would be undesirable to have different rules for relationships ending in death.
This delay is obviously disappointing for everyone that has been involved in the PRA review and it means New Zealanders will have to live with our outdated laws a bit longer.
Below are the main recommendations for changes to the law and my comments:
1. The family home is not automatically split 50:50
Current laws dictate that assets are split 50:50 if couples have been together for three or more years, regardless of what each party brought into the relationship.
In many situations this is not fair. The Law Commission recommends there is no longer an automatic 50:50 split when a relationship ends. Instead, 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.
These changes are a big departure from the current 50:50 split. While there is no easy solution to the sharing of property after a separation, I view this change as an improvement to the current rules.
Prenups will still be used if a couple does not want to be governed by the rules in the Property (Relationships) Act.
Comment: This is a controversial provision. One the one hand, it takes into account pre-relationship wealth each party brings into a relationship, but on the other hand, it makes it very difficult for the partner that receives less than 50 per cent of the split to purchase another home in a rising property market. This is also problematic.
2. 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 may make it easier to achieve a fair result.
Comment: The one size fits all approach is very controversial. This provision would be strongly opposed by many professionals.
3. Greater powers to share trust property
Trusts will no longer provide easy protection for property that would otherwise be relationship property. The proposed changes will give the Family Court greater powers to make orders relating to trust property that was produced, preserved or enhanced by the relationship.
Comment: there needs to be changes to fairly recognise the contributions of both parties to trust property, particularly if it was the party's family home during the relationship.
4. Children's interests will be given priority
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.
Comment: 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 also need to be considered from a financial perspective, particularly when one party takes primary care of the children or when finances are an issue. This is a much-needed addition to the current regime.
5. Support to ensure fair outcomes
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 ensuring that separating couples properly disclose all relevant information about their property to each other, whether or not they go to court.
Comment: There are huge delays in the administration of justice which vary greatly throughout the county. It doesn't seem fair that in filing in one court you can get a much quicker outcome in one court than another court.
6. 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 options for resolving PRA matters. The Law Commission recommends funding for community organisations to provide person to person support.
Comment: These services would go a long way towards making the law more accessible for people.
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.
Changing Relationship Property Laws do not appear to be a priority for the government. However, it is clear that the current laws are out of date.
What couples need is information about the law and their options that are easy to understand. They also need support as they negotiate a fair resolution.
The PRA review addressed these issues of support and resources for separating couples. If it delivers improvement in these areas along with changes to the law, it will have a valuable impact for New Zealanders. Unfortunately, we need to wait a bit longer for these much-needed changes.
- Jeremy Sutton is a senior family lawyer, specialising in divorce cases where there are significant assets, including family trusts and complex business structures. www.jeremysutton.co.nz