Couples who share one or more properties and plan on contracting out of equal division upon separation should ensure that each of them completes their due diligence before signing a Contracting Out Agreement.

It is usual for contracting out agreements and relationship property agreements to provide for one partner to buy out the other partner’s share in the property upon separation.

However, such a clause should only be inserted if the purchasing partner actually has the financial ability to purchase the other’s share or can secure bank finance to do so. If this is not possible, the agreement should provide for an alternative option at the very least..

Problems can arise if a couple have joint liability for the mortgage on the property. If one partner is unable to buy out the other’s share upon separation as per the agreement, the other partner will continue to be liable for the mortgage outgoings.

This can mean the contracting out agreement is ineffective and does not provide the “clean break” as intended.

If the purchasing partner defaults on mortgage repayments banks will not release the other partner from liability just because a relationship property agreement is in place. The other partner will continue to be liable for the repayments even after separation.

Partners must receive independent legal advice before entering into an agreement, but both parties and their lawyers must make sufficient enquiries about the other’s financial situation to avoid agreeing to terms which cannot be effected.

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 Hanifa Kodirova

Family Lawyer and Law Clerk


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.