Property Investment
8 min read
Author: Nefe Teare
Financial adviser at Opes. Formerly a senior adviser at one of NZ largest investment firms. Owned 3 properties by 30.
Reviewed by: Lance Jensen
15 years’ experience in the industry. Active property investor with $6 million+ portfolio. Financial adviser at Opes Partners.
Every relationship already has a prenup. It’s either given to you by law (and everything is split 50/50) or you create your own arrangement with lawyers.
In this article, you’ll learn what a relationship property agreement (prenup) is, whether you should get one, and how they work.
Make sure you read the whole article, because the divorce rate in New Zealand is around 40%.
So there’s about a 2 in 5 chance that if you get married (or have a long-term relationship) you’re going to have to deal with splitting your assets.
You might have heard the term prenup (short for prenuptial agreement) from watching a lot of American movies.
Over here in New Zealand, we call them a Contracting Out Agreement or a Relationship Property Agreement.
I like the phrase “contracting out agreement” – because that’s exactly what you’re doing: setting up a contract so you don’t follow the default rules set by law. Without one, the Property (Relationships) Act 1976 kicks in.
Once you’ve been coupled up for three years (or earlier in some cases) the law says you need to split all your assets 50/50.
That includes your shared home, your KiwiSaver, any business equity and even Lotto winnings.
Even if one person brought lots of assets into the relationship, it all may count as relationship property and be up for splitting.
That’s where relationship property agreements come in. They let you agree in advance: What’s mine is mine, what’s yours is yours, or here’s how we’ll divide things if we break up or one of us dies.
You can still make it 50/50 – or you can make it more-or-less whatever you both agree to.
You might think that relationship property agreements are just for the rich (or the paranoid).
But times have changed since the laws were written (almost 50 years ago). We don’t settle down for life the same way we used to.
These days people are getting married later in life. It used to be that the median man got married at 23.5 and the median woman at 21.2 years old. That was back in 1971.
Today, we’re getting married 10 years later. The median man gets married at 33.2 and the median woman at 31.8.
That means you often bring more assets into a relationship – things like a house, a business, or a beefed-up KiwiSaver.
Many of us don’t just have one lifelong relationship anymore, either. It’s normal to go through a few long-term partners, and not everyone gets married.
But the rules around relationship property still impact the unmarried. De facto relationships are just as legally binding under the law after three years of living together as a couple.
Put simply, relationships are more fluid, assets are more complex, and the traditional 50/50 default doesn’t suit every situation.
That’s why thinking about relationship property agreements is more relevant than ever.
There are times when a contracting out agreement isn’t necessary.
If you’re 18, starting from scratch, and neither of you own much, fair enough. You might not need a relationship property agreement. It might be more trouble than it’s worth.
Or if you’ve been together 20 years, raised kids, and built everything as a team – a 50/50 split probably makes sense.
However, a prenup is especially worth considering when:
Let’s say you want to buy a house. Your parents give you $100,000 for a house deposit, so you’re putting in a bigger deposit than your partner.
After 4 years you split up. Well, that $100,000 could be considered relationship property, so your partner takes half.
But that might not have been what your parents wanted. They gave the money to you, not your partner. So you might want to have a relationship property agreement that protects your bigger deposit.
You might meet the love of your life at 35. At that point, you’re successful. You have savings, shares and a home. And you built that all up before the relationship started.
You move in with your partner, then 3.5 years later you break up. If you don’t have a contracting out agreement, they could take half of everything.
It doesn’t matter that you came in with more at the start. So a relationship property agreement could have protected you.
Let’s say you are 25 years old. You’ve been with your partner for 5 years and you’re living together, so you are de facto. If you split everything is 50/50.
That might be OK because you are young, you’re both working, and you don’t have many assets.
But then let’s say you and your mate start a business. It’s not worth much now, but it could be in the future. It could be worth setting up a relationship property agreement.
Because if the business goes well, and then you split up, you might need to give your ex shares in your business, or have to buy them out. Either way, that could expose and impact your friend/business partner.
So, often when you start a business it can be a good time to put a relationship property agreement in place.
This is important.
Only 10% of Kiwi couples have a relationship property agreement in place.
And a lot of people just think that if they do break up it’ll be amicable.
You might think: “We’ll just take back what we put in” or “We’re mature – we’ll split it fairly.”
You might think that when you’re in love and thinking logically, but that doesn’t happen.
Breakups don’t bring out the best in people, especially if one partner has cheated or done something to hurt the other person.
And even if your partner is reasonable when the divorce happens, all it takes is a new boyfriend, girlfriend or grudge – and suddenly you’re both lawyering up.
One person I know was with their partner for six and a half years. They had a Relationship Property Agreement. When it ended, he packed a bag and walked away. No drama or fighting, because it had already been agreed and sorted.
Have the tough conversation now when you’re in love and thinking clearly. Not later, when you’re angry and packing boxes.
In short: everything is up for grabs. Even assets in trusts.
Here’s a true story. A man ended a 26-year marriage. He kept the house at the end of the relationship, so he wanted to protect it from any future relationships.
That’s why he put his home in a trust.
Then he got into a new relationship. It lasted 10 years. When they split, she successfully challenged the trust.
The court ruled that the trust had been set up to deliberately prevent her from claiming relationship property. That’s not allowed. She got half.
So while a trust might help, it’s not bulletproof. A relationship property agreement gives you stronger protection.
You need to work with a lawyer to get a contracting out agreement.
Your partner needs to talk to a separate lawyer too.
That’s important: you must each get separate legal advice, otherwise the agreement could later be ruled invalid (more on this below).
The cost of a prenup varies widely. A straightforward agreement might start at around $1,500 + GST, but more complex agreement can easily cost $10,000 or more.
People often forget that death ends a relationship too, so many agreements include what happens if one partner passes away, as well as if the couple separates.
Ultimately, the cost depends on the complexity of your financial life. That means the number of assets you both have, how they’re owned, and what you both want the agreement to do.
Here’s why separate lawyers matter:
One couple’s partner didn’t talk to a separate lawyer. Instead, they used a lawyer friend. That lawyer didn’t tell them to use different law firms.
When the relationship ended, the agreement was invalid. She put in more money than him for the house and she thought she’d protected herself. In the end, her partner walked away with 50% of everything.
I get it, signing a prenup with your loved one is uncomfortable. You don’t want to think about breaking up. You want to think about growing old together.
So it’s important to discuss, but if your partner refuses to engage or sign anything then you need to make a decision.
Because you have a choice:
It sounds really hard, but those are your options (if your partner won’t accept any relationship property agreement).
If you are uncomfortable with the risk, then it’s your responsibility to leave (harsh but true).
I’m not a lawyer. I’m not selling prenups. But I am telling you how the system works – and how to protect yourself in it.
You don’t have to like the law, but you do need to understand it. Because if you choose to ignore it, you don’t get to opt out of the consequences.
Financial adviser at Opes. Formerly a senior adviser at one of NZ largest investment firms. Owned 3 properties by 30.
Nefe is a Registered Financial Adviser at Opes Partners with 7 years’ experience in financial services. Before joining Opes, she was a senior adviser at one of New Zealand’s largest investment firms, managing $13 million in KiwiSaver and managed funds. She’s helped clients invest over $26 million in property and owned 3 properties before her 30th birthday.
