A contracting out agreement, also known as a “prenup” or a relationship property agreement, is an agreement with your partner that says who owns what, and how you will divide up relationship property. 

By making a contracting out agreement, you and your partner can “opt out” of the “normal rules” which normally apply under the Property Relationships Act (the ‘Act’). These rules detail how the Family Court might divvy up your shared relationship property.

This is for couples or parties intending to enter into a relationship, whom have assets which may be relationship property. Remember – your agreement will not work (it won’t be legally binding) if you do it yourself! 

If you are already in a relationship and looking to separate, more information about separation agreements can be found here.

How might the Court split our relationship property?

A Court will try to balance the division of property between couples. The Court recognises that there might be unequal bargaining power between couples and so there needs to be a just way of dividing up relationship property. The Act encourages couples to decide freely. This means you both choose how you want to separate property if your relationship ends.

When can I create a contracting out agreement?

Usually couples will get a contracting out agreement when they are newly in a relationship, thinking about getting into a relationship or before marriage or living together.

As with most things, it’s best to get one as early as possible if you think you will need it. This could avoid awkward conversations or potentially expensive proceedings later down the track.

How do I get a contracting out agreement?

You will need an agreement in writing that is certified, signed by both parties and their independent lawyers following independent advice on the agreement terms. Agreeable has helped hundreds of Kiwis get a certified agreement with our simple, 100% online process. 

What are some issues to be prepared for?

Firstly, ensure that your partner is willing to agree to get a contracting out agreement. As this process is voluntary, both parties must be committed.

The usual issue with contracting out agreements is that one party may be stopped from giving away their rights without knowing the consequences of signing the agreement or what they are entitled to under the Act. It does this through a certification system.

This means that independent lawyers must provide you with advice as to whether to sign the agreement or not, or put forward better terms for you. There is a higher risk changes to your contracting out agreement will be made if your agreement does not appear to be fair. Fair doesn’t necessarily mean 50/50 but it does need to show that it is not a “serious injustice”.

How do I make sure our contracting out agreement is fair?

The Act also attempts to prevent a partner from entering an agreement when the other partner is bullying them into it.

A court can, even if an agreement satisfies the criteria under the Act, still set aside an agreement if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice. There are a few factors a Court will look at which will be important to consider in your agreement:

  • whether the agreement was unfair or unreasonable in light of all the circumstances at the time it was made;
  • whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties);
  • the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering the agreement and of course any other matters that the court considers relevant.

The best way to ensure your agreement is fair might be by asking a trusted person. You can run this past close family or friends to see what they think of your agreement terms. Use common sense here to save yourself hassle down the road if lawyers disagree!

contracting out agreement
Contracting out agreements could save you time and money in the long run in the event of a separation

I brought ‘x’ into our relationship. When does our separate property become relationship property?

Each party will have to define what assets could be classified as separate property and what property could be classified as ‘relationship property‘. The Courts will recognise if the non-owning partner contributes to any increase in value of the other partner’s separate property. This increase is deemed ‘relationship property’ and thus equally shared.

Note that this may well include indirect contributions too.

Contributions do not have to be financial ones. Looking after the family home or children can be deemed a contributing factor. The Courts will take this into account when determining division of property.

When should we update our contracting out agreement?

Your agreement will not last for an eternity. It won’t cover all future assets that you acquire throughout your relationship which might be considered relationship property. The longer you leave an old contracting out agreement, the higher your risk. It is safe to update your agreement when your circumstances change. This might be after a particular event or every couple of years.

We are heading into a new relationship. What if we start a family?

That is great! But children can add complexity to your agreement – not to mention relationship! This means this is a factor to consider if you see the potential or are trying to start a family together. Our lawyers will advise you on this. It will likely mean that additional clauses will need to be drafted into your agreement. This is to take into account what happens if one partner has to take time off to take care of children later on.

We have agreed on what’s mine etc., what next?

You will need this contracting out agreement certified by a lawyer. Agreeable provides this service as a package so that it is easy for you and your partner to get this done if you use our agreement. We strive to make this process as simple, stress-free and predictable as possible. We provide one affordable fee. However, our lawyers are independent. This means they will have your best interests in mind.

Our situation is complex. Where do we go to for help?

Agreeable always does a preliminary assessment as to whether a contracting our agreement suits your situation. We also have the option of our lawyers providing you with tailored legal advice. Please enquire with us. We will see how we can help. If not, we may be able to direct you elsewhere.

Click here to find out more about how Agreeable can help you to create an agreement.