People in de facto relationships now have the same legal status with regard to the division of property as those who are married, under the Property (Relationships) Act 1976. This Act is mainly about how the property of married couples and couples who have lived in a de facto relationship is to be divided up if they separate or if one of them dies. In general, the couple's property is to be divided equally between the couples.

Who is covered under the Act?

The Act covers married couples and those in de facto relationships whether they be hetro-sexual or same sex relationships. If the parties in any of those relationship have been together for at least three years then the presumption of equal property division in the Act will apply. This means, for example, that the home in which the parties live will be seen as a relationship home and on the parting of the ways, any equity in the property will be divided equally. This is regardless of whether one party has contributed a greater financial amount than the other, even if one party owned the property prior to the commencement of the relationship. As existed previously, there is the overriding qualification that the relationship property will not be divided equally if there are extraordinary circumstances that would make equal sharing unfair.

Separate property

Property that the parties have owned prior to the relationship and have kept separate, remains separate property. Any increase in the value of that separate property that is directly or indirectly attributable to the actions of the other partner is treated as relationship property and apportioned accordingly. This apportionment is based on the contributions of either party to the increase.

If the parties do not wish to have equal shares then they are able to enter into a contract stipulating some other property arrangement if the relationship ends. As with the Matrimonial Property Act 1976 the parties will need to be given independent legal advice as to the effects and implications of such a contract.

Any matrimonial property agreements entered into prior to 1 August 2001 will simply carry on under the old Act and any agreements entered into between 1 August 2000 and 1 February 2001 will be dealt with under the new Act. Unlike previously, if a couple has been in a de facto relationship the length of time of the de facto relationship is added on to the marriage. Therefore if a couple had been married for one year but have lived together for the previous three years then they have passed the threshold of a three year relationship.

Disposal of property to a trust

The Act gives the Court greater powers with respect to the transfer of relationship property to a trust or company. If either or both partners have disposed of relationship property to a trust and that disposal has the effect of defeating the claim or rights of one of the partners, the Court can provide for compensation.

If the Court rules that compensation should be given under these circumstances then it can order any of the following:

• require one partner to pay to the other partner a sum of money whether out of relationship property or separate property;
• require one partner to transfer to the other partner any property where the property is relationship property or separate property;
• require the trustees of the trust to pay to one partner the whole or part of the income of the trust either for a specified period or until a specified amount has been paid.

It is envisaged that the above provisions would be used when the matrimonial home and all assets have been transferred to the trust quite legitimately in the first instance for creditor protection or other reasons and then the relationship finishes and one party is very severely disadvantaged as all property is within a trust. Similar provisions relate to companies.

The 50/50 split

Under the Act the Court has the discretion to vary the 50/50 split. The Court may make this split if it is satisfied that after the marriage or de facto relationship ends, the income or living standards of one spouse or de facto partner are likely to be significantly higher than the other because of the effects of the division of functions within the marriage or de facto relationship. The Court would have regard to:

• the likely earning capacity of each spouse or de facto partner;
• the responsibilities of each spouse or de facto partner to any minor or dependent children of the  marriage;
• any other relevant circumstances.
  

This means that if one spouse or partner is earning considerably higher amount of money than the other, and this is caused by the division of functions during the relationship, then the Court can order a lump sum to be paid out of the other parties relationship property. But that larger share comes out of property accumulated during the relationship and not out of future earnings.

Providing for dependants

The main concerns for the Court are any dependent children who need to be provided for. This may also apply in a situation where there is an older spouse or de facto who has not been in the work force for many years. In some situations he or she may very well end up with getting sufficient funds from the marriage to simply buy a house and have no further means of support.

The Act also includes provisions to amend the spousal maintenance provisions in the Family Proceedings Act 1980 and to extend their coverage to de facto partners. Under this new Bill the Court can consider a wider range of circumstances in determining whether maintenance should be paid. There is still the proviso that each spouse or de facto partner must assume responsibility within a period of time that is reasonable in all the circumstances to meet his or her own needs, but there are some exceptions to that particular clause.

It is suggested that the Courts will be looking at the age of spouses or de facto partners whether or not there is young dependant children. It will also consider the duration of the relationship when assessing any maintenance payable and will take into account any relationship property that has already been distributed.

When one partner dies

There are also provisions in regard to the death of a partner and put simply this means that the attests provisions will now apply to people in de facto relationships i.e. when a person dies without a valid will. Also the Act extends the application of the Family Protection Act 1955 for people in de facto relationships. Under this Act certain people may apply for provision to be made out of the estate of the deceased if adequate provision is not available for their proper maintenance and support. Currently de facto partners have no rights to claim under the deceased partner's estate.

As this is new legislation, until some cases come before the Courts it is difficult to say how far reaching the new Act will be. Its purpose is to make a more equitable split to a disadvantaged partner after a relationship ends. It is likely that the Courts will be cautious as  with any decision it can always be appealed.

The information on this web site is of a general nature only. Readers are advised to establish the applicability of information in relation to specific circumstances and not to rely solely on the information provided here.