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Can partners make their own agreement about property?

When a relationship ends, people do not need to divide property according to the Property (Relationship) Act 1976. Instead, the law allows partners to make their own agreement about how they divide their property.

There are two types of agreement. First, partners thinking of entering a relationship, or who are already in a relationship, can enter an agreement that applies if they separate. You may know these types of agreements as prenuptial agreements. Second, partners who have separated can enter an agreement to divide their property rather than go to court. These types of agreements are settlement agreements.

Jill and Pita
Jill and Pita have been in a relationship for a year. They buy an apartment and move in together. Jill has money that she inherited from her grandmother. Pita has savings, but less than Jill. Pita and Jill decide that if they separate it is fair they split the value of their apartment 60:40 rather than 50:50.

Pita works as a freelance software developer. He and Jill agree that if they separate Jill should have no rights to Pita’s software.

Jill and Pita see a lawyer to make sure that their agreement will apply if they separate instead of the Property (Relationships) Act 1976.

We know little about how many couples use agreements. We know little about why the people who use them prefer their own agreement rather than the law. We want to learn who uses agreements and why.

The law recognises that people in relationships might make agreements that could be unfair. Some partners might agree to things they would not normally agree to because they are in love. They might think the relationship will end if they do not agree. Or they might not know of their legal rights to the property.

To protect the partners’ rights, they must follow a specified procedure when entering an agreement:

  1. The agreement must be in writing.
  2. Each partner must receive advice from a lawyer before signing.
  3. The lawyer must witness the partner sign the agreement.
  4. The lawyer must certify that he or she explained the effect and implications of the agreement to the partner.

If the partners do not follow the procedure, the agreement has no effect.

We want to know if this procedure protects people’s rights while still being accessible for most people.

If a couple come to an agreement, but fail to follow the correct procedure, should the agreement be binding anyway?

Even if the agreement is effective, the court can set an agreement aside. However, the court can only exercise this power if the agreement would cause a ‘serious injustice’, so it is rarely used. Should the court be able to rewrite people’s agreements to make them fairer?

Lastly, we want to know what property people should be able to divide through an agreement. Should people be able to divide their KiwiSaver through an agreement? Should people be able to divide property held on a trust?

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