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Contracting out agreements (Prenups) in New Zealand

Key Takeaway

Contracting out agreements, often called 'prenups', allow partners in New Zealand to decide how their property will be divided if their relationship ends. These agreements override standard legal rules and must meet strict legal requirements to be valid, including both parties receiving independent legal advice before signing. A court may set them aside if they would cause serious injustice.

Contracting Out Agreements (Prenups) in New Zealand

A contracting out agreement, commonly referred to as a 'prenup' or prenuptial agreement, is a legal document that allows individuals in a relationship to decide how their property will be divided if their relationship ends, either through separation or death. These agreements operate by 'contracting out' of the standard rules for property division established by the Property (Relationships) Act 1976.

Purpose and Scope

The primary purpose of a contracting out agreement is to modify or exclude the application of the Property (Relationships) Act 1976 ('the Act') to the property of the parties. This means that instead of the default 50/50 division of relationship property upon separation, the agreement can specify a different arrangement [Source: Property (Relationships) Act 1976, s 21(1)]. An agreement may relate to all property of the parties or to specific items of property, and it can apply during the relationship, on separation, or on death [Source: Property (Relationships) Act 1976, s 21(1)].

Relationships Covered

The Property (Relationships) Act 1976, and therefore contracting out agreements made under it, applies to married couples, civil union partners, and partners in de facto relationships that have lasted for at least three years (or shorter if there is a child of the relationship or significant contribution by one partner) [Source: Property (Relationships) Act 1976, s 2 & s 14].

Key Definitions

  • Relationship property: Generally, this includes all property acquired by either partner during the relationship, the family home (regardless of when or by whom it was acquired), and property acquired for the common use or benefit of the partners [Source: Property (Relationships) Act 1976, s 8].
  • Separate property: This typically includes property acquired before the relationship, gifts or inheritances received by one partner, and certain taonga. Separate property usually remains the property of the individual partner and is not divided upon separation, unless it becomes intermingled with relationship property or a contracting out agreement stipulates otherwise [Source: Property (Relationships) Act 1976, s 9].

Validity Requirements

For a contracting out agreement to be valid and enforceable, it must meet specific formal requirements outlined in the Property (Relationships) Act 1976. These requirements ensure that both parties fully understand the implications of what they are signing and have had the opportunity to seek independent advice. The agreement must be:

  • In writing [Source: Property (Relationships) Act 1976, s 21F(1)(a)].
  • Signed by both parties to the agreement [Source: Property (Relationships) Act 1976, s 21F(1)(b)].
  • Each party must have received independent legal advice before signing the agreement [Source: Property (Relationships) Act 1976, s 21F(1)(c)].
  • The signature of each party must be witnessed by a lawyer [Source: Property (Relationships) Act 1976, s 21F(1)(d)].
  • The lawyer who witnesses a party's signature must certify that, before the party signed the agreement, the lawyer explained the effect and implications of the agreement to that party, and the party appeared to understand the advice [Source: Property (Relationships) Act 1976, s 21F(1)(e)].

Setting Aside or Varying an Agreement

A court may set aside or vary a contracting out agreement if it is satisfied that giving effect to the agreement would cause serious injustice [Source: Property (Relationships) Act 1976, s 21J(1)]. Serious injustice is a high threshold, meaning a court will not lightly overturn a validly made agreement. When considering whether serious injustice would be caused, the court must have regard to:

  • The provisions of the agreement [Source: Property (Relationships) Act 1976, s 21J(4)(a)].
  • The circumstances in which the agreement was made [Source: Property (Relationships) Act 1976, s 21J(4)(a)].
  • Whether the agreement has become unfair or unreasonable in the light of any unforeseen circumstances since it was made, which may include changes in the parties' economic circumstances or the care and upbringing of any children of the relationship [Source: Property (Relationships) Act 1976, s 21J(4)(b)].
  • Whether any other agreement (including an oral agreement) has been made between the parties or contemplated by them [Source: Property (Relationships) Act 1976, s 21J(4)(c)].
  • Any other matters that the court considers relevant [Source: Property (Relationships) Act 1976, s 21J(4)(d)].

When to Seek Independent Legal Advice

It is strongly recommended that individuals contemplating or involved in a contracting out agreement seek independent legal advice. A lawyer can explain the legal implications, ensure all requirements for validity are met, and assist in drafting or reviewing the agreement. For free legal help, individuals can contact their local Community Law Centres or other pro bono legal services.

Key Resources