The Property (Relationships) Act 1976 (“PRA”) was designed with good intentions: to facilitate the just division of relationship property between spouses or partners when a relationship ends, whether by separation or death. Historically, a just division was synonymous with an equal (50/50) division. However, in the nearly five decades since the PRA was enacted, societal expectations around roles and financial dynamics between couples have evolved – highlighting that an equal division is not always fair. This article examines how the PRA can address these disparities by allowing for an unequal division of property in certain cases – specifically, by compensating parties for non-financial contributions where there are significant differences in earning capacity between partners (“economic disparity” or a “section 15” claim).
The starting point is an equal (50/50) split of relationship property which can include, bank accounts or shares, KiwiSaver, vehicles, properties, and chattels just to list a few. While liabilities can include any debts or loans accumulated by either or both parties during the relationship.
Even when the net equity of relationship property (assets minus debts) is substantial, dividing it equally may not redress the imbalance that may have occurred during the relationship. This is especially true when one partner has sacrificed their earning capacity to focus on other aspects of the relationship, enabling the other partner’s career to move ahead. In these instances, adjustments may need to be made after relationship property is divided but before it is distributed.
While the parties can reach their own agreement, the Court can direct compensation by way of a payment of a sum of money or the transfer property from one party’s share of the relationship property to the other party but only if the Court considers it ‘just’ to do so. However, the Court needs to be satisfied that following the end of the relationship, one partner is likely to have significantly higher income and living standards than the other, due to the division of functions during the relationship.
Factors that influence the Court’s decision as to whether there should be some form of compensation include the likely earning capacity of each party, the ongoing responsibility for any children of the parties, and other relevant factors such as the parties’ age and qualifications; whether the decision for one party to remain out of or delay returning to paid employment was made jointly; whether one party’s employment limited the other’s opportunities (such as relocating overseas); and whether the higher income of one party is attributable to separate property rather than relationship property.
If you find yourself navigating the end of a relationship, it’s always good to know where you stand. Speaking to an experienced Family Lawyer who will be able to provide you with clarity and peace of mind, can help you make informed decisions. Whether you’ve focussed on delivering the non-financial contributions to your relationship or want to safeguard the separate property you brought into it, the friendly Family Law team at Schnauer & Co can help you understand your rights under the PRA.