The difference between a relationship property agreement and a contracting out agreement…

Many people can be confused by the legal terms relating to relationship property-based agreements such as Contracting Out Agreements and Relationship Property Agreements.

The main difference between a Relationship Property Agreement and a Contracting Out Agreement is the time in the relationship that the agreements are entered into.

For the purposes of relationship property, a “relationship” is defined by law as a marriage, de-facto relationship, or civil union.

While the timing of entering into a marriage or civil union is clear, a qualifying de-facto relationship for relationship property purposes begins three years after the start of a new relationship, and it is from that time when the de-facto legal position will apply to the equal division of property between partners.

Contracting Out Agreements

Contracting Out Agreements are generally entered into before a relationship becomes a “relationship” under the legal definition. The purpose of this agreement is to define each partner’s separate property and the property of the relationship. This dictates how the assets and liabilities are to be split in the event of a breakup.

The agreement is called a “contracting out” agreement as the parties are agreeing to contract out of the default legal position upon a breakup.

Contracting Out Agreements are often called “pre-nups”, a colloquial term.

A Contracting Out Agreement is also a “living” document in the sense that it can be reviewed and amended by the parties throughout the life of the relationship.

Relationship Property Agreements

On the other hand a Relationship Property Agreement is entered into after the breakdown of a relationship. The agreement, often referred to as a “settlement agreement” or “separation agreement”, sets out the agreed division of assets and relationship property post-breakup.

This agreement allows partners to divide their relationship property in a way other than that prescribed by the default legal position. If the partners had a Contracting Out Agreement, it would become relevant at this point, as it would indicate how the partners had previously agreed to divide property.

Relationship Property or Separation Agreements are also designed to be full and final, and often cannot be reviewed or set aside once they are signed, unless the terms of the agreement create, or created, serious injustice to one party.

The process of creating these agreements and entering into them can become very technical and confusing. There are some strict requirements that must be met for them to be valid, so it clearly pays to get everything right from the outset.

It is important to seek legal advice if you are thinking about entering a contracting out agreement or a relationship property agreement. Given the complexity and serious potential risks of getting it wrong, it is wise to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are. At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Shaun Cousins and Hunter Flanagan-Connors

Please note that Rainey Collins is not contracted to provide Legal Aid, other than in the Treaty of Waitangi area.  We therefore are unable to take on any Civil or Family Legal Aid work. If you require Legal Aid in those areas, you can search the list of Legal Aid lawyers on the Ministry of Justice website.