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It’s a Simple Agreement so Why Doesn’t It Feel Simple?

Updated: Apr 28

I have lost count of the times I have had a prospective client approach me to help with their relationship property division which they are quick to claim is "pretty simple”. Often, the client is correct and the division is straight forward and the parties reach agreement relatively easily. Other times, they are woefully wrong and their relationship property matter is a minefield of legal, financial, emotional and negotiation complexities they never envisaged.

Even if your asset base is straight forward and you and your spouse have been able to quickly reach agreement together over coffee, formalising that agreement won’t be as simple as walking into your lawyer’s office together, signing an agreement and walking out again. There are some hoops to jump through.

New Zealand’s relationship property law, the Property (Relationships) Act 1976, sets out some important criteria that need to be met for an agreement about relationship property to be legally valid and enforceable. This is true whether the agreement is a pre-nuptial agreement (or Contracting Out Agreement) or one entered after a separation. If those criteria are not met, you could later face a claim that the agreement should be turned over. Merely agreeing on your property division at your kitchen table is unlikely to satisfy these criteria and will leave you vulnerable to future claims.

What are the requirements to be met to ensure your Agreement goes the distance?

Your agreement needs to be in writing and needs to be signed by both of you.

You and your spouse each need to receive independent legal advice. You cannot use the same lawyer for this. The lawyers you and your spouse use must be truly independent of one another and cannot work in the same firm. Upon providing you with independent legal advice about the effects and implications of the agreement, your lawyer will sign a certificate within the agreement to confirm the requisite advice has been provided. The agreement can be overturned by a Court if it later decides your lawyer or your spouse’s lawyer has failed to properly and fully provide advice about the Agreement.

Your signature on the agreement must be witnessed by the lawyer who has provided the certificate as to independent legal advice. You cannot receive independent legal advice from your lawyer and then have your next door neighbour witness you signing the agreement.

Of these requirements, it is the need for independent legal advice that usually causes clients the most frustration. While most people seem to readily accept the need to each engage their own lawyer, frustrations can arise around what the lawyer requires to properly meet their legal obligations around advising about the proposed agreement.

Generally, your lawyer should be advising you about what you could expect to receive if your property is divided in strict accordance with our relationship property laws and about how this differs (or not) from what you stand to receive under the proposed Agreement. I generally like to show this to my client in the form of a calculation that sets out “the bottom line” - what they could expect to receive under the Act and then show them how this compares to a calculation of what they are actually receiving under the Agreement. My client can then make a very real comparison of the two in dollar terms and assess whether he or she wants to proceed with the agreement.

The obligation on lawyers when providing advice about relationship property agreements is an onerous one. To provide full and proper advice about an agreement, both lawyers will seek information and disclosure of all the property that each party has an interest in. In a number of cases where agreements have been overturned for lack of sufficient legal advice, the Court has done so because a lawyer hadn't obtained sufficient valuation information. The Court has been unable to see how the lawyer, without proper valuation information, could possibly have been able to advise his or her client about the settlement contained in the agreement and how it measures up against the client’s legal entitlements.

The information and documents you will likely be asked to provide include valuations of all your assets, bank statements (sometimes going back a considerable time period), life insurance and superannuation information, financial statements for any businesses, documents about any family trust, mortgage and credit card statements.

In some situations, gathering and providing the information for your lawyer can meet more than one purpose. If one of you is borrowing funds to buy the other one out, it is likely that the lending bank will require, as a condition of the loan, evidence of the value of the property as well as a properly completed Relationship Property Agreement.

I can well understand the frustration of thinking you have reached agreement with your spouse only to discover there is more of the maze to get through before you have a finalised agreement. However, if I am not mistaken, you want your property division sorted, you want certainty about your financial future moving forward and you want to be able to enter future financial decisions relying on knowing your relationship property agreement is going to endure. To achieve this, it is best to accept the reality of what the law requires, get good advice, don't give into the temptation to take shortcuts and provide what is asked of you quickly. This will minimise delays, keep your costs down and reduce the risk of your Agreement being overturned later.

Got a relationship property issue you’d like the experienced team at Lighthouse Legal help you navigate though?  Call us on 0800NAVIGATE or book an initial free consultation with one of our team of lawyers here

Names and any identifying information have been altered to protect the privacy of individuals. The information in this blog is current at 1 April 2024. The information in this blog is general, educative information only. As such, it should not be relied on in place of getting your own legal advice.


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