The Law Commission has recently released its final report reviewing the Property (Relationships) Act 1976 (PRA). The Commission began the reviewing process back in 2016. The final report takes into account public feedback that has been received in response to the issues and preferred approach papers.
Although the Commission has said that certain fundamental aspects of the PRA should remain as they are, it is clear that many areas need to be updated in order to reflect significant social change.
The key proposals made by the committee are summarised below:
(1) Classifying Relationship Property
Changes to what property is classified as relationship property have been proposed. Under the PRA all ‘relationship property’ is shared equally between couples upon separation. This includes the family home, whenever acquired. If one partner purchased the family home using their own funds before the relationship began, it is nevertheless classified as relationship property. The commission has proposed that the family home should not always be shared equally. If it was bought by one party before the relationship began, or was acquired by one party during the relationship by gift or inheritance, only the increase in value will be shared equally.
(2) Family Income Sharing Arrangements (FISAs)
After considering ways to deal with the economic advantages and disadvantages that can arise on separation, the Commission has come up with the idea of introducing a family income sharing scheme. The purpose of the FISA is to account for economic advantages and disadvantages in a relationship due to contributions and sacrifices made by partners throughout the duration of the relationship.
FISAs will only be available for the following qualifying relationships:
a) If the couple have a child together;
b) If the relationship was 10 years or longer;
c) If one partner made sacrifices during the relationship such as reducing work, taking a lesser paying job or declining promotion, in order to make other contributions to the relationship.
It is recommended that qualifying couples will halve the family income for a period of time that is about half the length of the relationship, to a maximum of 5 years. The limits of each FISA would be determined by calculating each partner’s income before separation, and the length of the relationship.
(3) Children’s Interests
Separation can cause major disruptions to the lives of children. The Commission has proposed several changes in order to give greater priority to the children’s best interests following separation. It has been proposed that there is a presumption in favour of granting the primary caregiver temporary occupation of the family home following separation, to minimise disruption to everyday routine.
It has also been recommended that the court should have the power to set relationship property aside for the benefit of any minor or dependent children of the relationship, if it considers it just.
The Courts currently have little power to make decisions involving trust property. It has been proposed that the Courts should have greater powers to share trust property that was produced, preserved or enhanced by the relationship.
(5) Clarifying what relationships are governed by the PRA
The PRA applies to all marriages, civil unions and de facto relationships of three years or longer. However, it is not always clear what constitutes a de facto relationship as governed by the PRA.
The Commission has proposed there should be a presumption that two people are in a qualifying de facto relationship when they have maintained a common household for a period of at least three years. They have added that this presumption should be rebuttable by evidence that the partners did not live together as a couple, having regard to all the circumstances of the relationship including:
The current law also contains provisions for division of property where the relationship was of short duration (less than three years). The Commission has recommended that these rules are repealed, and the PRA should just apply to marriages, civil unions and qualifying de facto relationships.
In the meantime, until a new law is passed, the current PRA still applies.
If you have any questions regarding you relationship property issues, please contact us.
Ruby Haddon, Law Clerk (DDI 03 343 8586 / email@example.com).