Do you need to set up a contracting out agreement with your partner?
We can help guide you through the process and protect your interests – contact Natalie Miller today to set up an appointment.
31 May, 2012 | Natalie Miller
Article updated June 2024
The irony underpinning most COA’s is that people don’t ordinarily enter relationships with the intention of separating. The concept of determining your rights, sometimes before those rights have even crystalised, can be a challenging and emotional task. Having a properly prepared COA can hopefully avoid a drawn-out dispute about property upon separation, and potentially save you thousands of dollars in legal fees.
The Property (Relationships) Act 1976 (“Act”) sets out how the property of a qualifying relationship is to be divided upon separation or death. However, not everyone wants their property to be classified and divided in accordance with the Act. While each relationship turns on its own facts, in some cases, depending on how the parties have structured their affairs, the resulting division under the Act can be unintended or seem unfair.
Helpfully, section 21 of the Act allows parties to make their own agreement at any stage of a relationship as to the status, ownership, and division of their property. This is called a COA and it is designed to reflect the parties’ actual intentions measured against their individual sense of fairness.
The usual reasons for setting aside a COA are:
This article focuses on the third point above – serious injustice.
We have seen a steady rise in the number of claimants looking to set aside a COA. This is sometimes because they think they will get a bigger share of the property pool under the Act rather than the COA and so will try their luck, or because they consider the COA is now incredibly unfair.
However, the Courts are frequently affirming the right to contract out of the Act as a fundamental cornerstone of section 21 and will not readily set aside correctly constructed COAs unless a proper case for doing so exists.
The mere fact that a COA results in an unequal division of property compared with what a claimant would have received under the Act is not enough. The Courts have recognised that the very purpose of a COA is to differ from the Act.
The threshold for establishing a serious injustice is high. In deciding whether giving effect to a COA would case a serious injustice, the Court must consider:
Instructing a lawyer who specialises in relationship property to prepare or advise on your COA is critical. The legal framework against which your COA must be prepared, and within which your rights need to be assessed can be complex. An experienced relationship property lawyer will be able to provide competent advice and drafting to ensure your assets are protected in the way that is carefully tailored to your individual circumstances, balanced against the risks of having the COA set aside in future.
If you already have a COA in place, then it’s equally important to regularly review and adjust your COA so that it reflects your individual circumstances and intentions as the course of your relationship and property pool changes over time. This will greatly reduce the possibility of one party seeking to overturn the COA due to serious injustice if the relationship ends, and reduce the likelihood of the COA actually being overturned by the Court.
If you would like to become a client of Smith and Partners and get help with your contracting out agreement, please contact Relationship Property expert Natalie Miller on 09 837 6843 or email natalie.miller@smithpartners.co.nz to set up an appointment to discuss your contracting out agreement.
We will require a retainer to be paid prior to your first meeting, and we cannot assist with legal aid matters.
Please note that in accordance with our obligations under the Lawyers and Conveyancers Act 2006, we cannot provide legal advice unless you have become a client of Smith and Partners and have received our Terms & Conditions of Engagement and Info for Clients.