Relationship Property

Relationship Property Agreements

The Property (Relationships) Act sets out the rules as to what is relationship property and what is separate property and how relationship property is to be divided in the event of separation or death. A couple may, however, want to make their own rules as to what is their relationship property and what is separate property or they may want to set their own rules as to how property is to be divided in the event of separation or death. To do this the couple must enter into a Relationship Property Agreement (also known as a Prenuptial Agreement if entered into during the relationship or a Separation Agreement if it is made after the couple have separated).

There are a number of reasons why couples would choose to enter into a Relationship Property Agreement. They are often used by couples entering into a second or subsequent relationship later in life where there is substantial property that has been built up from a previous relationship that they want to keep as their separate property to leave to their children in their Will. A Relationship Property Agreement may also be used for asset, estate or tax planning purposes.

There are certain formalities that must be complied with in order for a Relationship Property Agreement to be legally valid.

The formalities are:

  1. The agreement must be in writing and signed by both parties.
  2. Each party to the agreement must have independent legal advice before signing the agreement.
  3. The signature of each party to the agreement must be witnessed by a lawyer.
  4. The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.

A Relationship Property Agreement that does not comply with the above formalities will be of no effect. Once a Relationship Property Agreement is entered into it is binding on the parties, their personal representatives and executors in the event that one or both parties die.

A Court can cancel or set aside a Relationship Property Agreement if the Court is satisfied that giving effect to the agreement would cause serious injustice. There are a number of things that the Court must have regard to in considering whether it would be seriously unjust to give effect to the agreement. The factors they must have regard to include the following:

  • The terms of the agreement itself.
  • The length of time since the agreement was made.
  • Whether the agreement was unfair and unreasonable in light of all the circumstances at the time it was made.
  • Whether the agreement has become unfair or unreasonable in light of any change in circumstances since it was made (whether or not those changes were foreseeable by the parties).
  • The fact that the parties wish to achieve certainty as to the status, ownership and division of property by entering into the agreement.

The more a Relationship Property Agreement departs from the equal sharing regime which is a fundamental principle underlying the Property (Relationships) Act, the higher the likelihood that it will be set aside by a Court. Also, the longer the relationship endures and the more the circumstances of the parties change, the more likely it is that the agreement will be found to be unjust. The Court must in the end balance the desire of the parties for contractual certainty about the future ownership of property against any unfairness in giving effect to the agreement. We always recommend that provision is made to review Relationship Property Agreements regularly or in the event of a significant change in the parties’ circumstances.