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27 September 2021

What's the difference between relationship property and separate property?

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Why is the difference important?

Most couples have a set way of arranging their finances, both with each other and separately. However, even if your finances are reasonably separate, that doesn’t mean the money sitting in your bank account is separate property and protected from a claim after separation.

It is important to take into account that even though property may be in the name of only one of the partners, it could still be relationship property and therefore be divided between the partners on separation or death.

The default rule under the Property (Relationships) Act 1976 is that separate property is kept by either party, and relationship property is divided 50/50.

Relationship property

Relationship property is usually property that is the product of the relationship. It always includes the family home and family chattels. Other common examples are other property bought during the relationship, and KiwiSaver schemes.

In the case of KiwiSaver schemes, only the contributions (employee and employer) and increase/loss in value during the relationship are relationship property. We talk about this more here. 

Any income received during the relationship is also usually relationship property, even if it is deposited into your own personal bank account. Savings accounts, investments, shares, or other income acquired by either party during the relationship is most likely relationship property.

Separate property

Separate property includes property owned before the relationship; inheritances and gifts from others; heirlooms and taonga. Separate property also includes the proceeds of separate property; for example, if a house that is separate property is sold and another house is bought with the proceeds, that new house is still separate property.

Can separate property become relationship property?

Property usually loses its status as separate property if the parties mix separate property with relationship property. A good example – and an event that happens quite often – is using money from an inheritance, or a gift from one person’s parents, to pay off some of the mortgage in the family home.

“Intermingling” is the term used to describe a situation where separate property becomes so intermingled with relationship property that it essentially “disappears”, and the whole property becomes relationship property.

Can I lose my house?

As discussed above, the family home is always relationship property and therefore will be divided 50/50.

A situation that we often see is where the couple lives in a home that was owned by one of them before the relationship began. The home where a couple lives is the family home and the family home is always relationship property. Therefore the home has lost its status as separate property and has become relationship property.

Do I need a contracting out agreement?

As a general rule, if the couple did not own much when their relationship began and the relationship has lasted a reasonable time, it is quite likely that most or all of the property will be relationship property. It’s still worthwhile checking to see if any of the property could be separate property.

However, if one partner is coming into the relationship with a great deal more property (for example, a large house deposit), we recommend that the couple enters into a contracting out agreement (or “prenup”) to protect the separate property from being intermingled.

You don’t need to be getting married to enter into a contracting out agreement. The law doesn’t make much of a distinction between married and non-married couples when it comes to relationship property, so it’s important that whatever your situation, your assets are protected.

We’ve separated and can’t agree what’s relationship property – what do I do?

It’s usually quite straightforward to figure out what property is relationship property and what’s separate property, but after separation disagreements can still break out between the partners. There are very limited exceptions to the equal sharing rule, but one partner may wish to argue for unequal division of the relationship property.

Get in touch

Whether you’re buying your first house with your partner and want to protect that gift from your parents, or you’re separating and in dispute about who owns what, we can help. If this sounds like you, don’t hesitate to get in touch today.


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