Dialogue: De facto? Watch for the 50:50 split

If flaws in the new Property Relationships Act are not remedied, a whole raft of problems will be created, writes PATRICIA SCHNAUER*.

Ever heard of living in sin? How about shacking up?

The young do it, the old do it, gays do it - even married people do it illicitly. Its modern name is "living in a de facto relationship". From today, when the Property Relationships Act comes into effect, our matrimonial property law alters to cover all these relationships.

The changes are huge. They include giving the court power to award more than half the property to one partner, increasing opportunities for spousal or partner maintenance and providing rights to a surviving partner to claim against their dead partner's estate. The property rights of thousands and thousands of New Zealanders will be affected.

The legislation will retrospectively affect those couples already in de facto relationships.

If they have been together for three years and then separate, the same rules will apply to de facto and same-sex couples as if they were married. All property will be divided in half.

Say your de facto relationship began on August 1, 1999, and you separate on September 1 this year. Although the new law will be just seven months old, when it comes to dividing your property, couples will be deemed to have been living together for three years and, generally, equal sharing follows.

The big question under the new law is: What does living in a de facto relationship mean?

The Property Relationships Act says it means living as a couple. It sets out criteria for the court to consider when deciding whether or not people are living in a de facto relationship.

The new law is particularly designed to help women who have lived in a de facto relationship for many years and who then separate. Sometimes these women and children have been left with little or nothing. It is this situation the Government has rightly sought to address.

But not all de facto relationships are the same. Some are serious long-term commitments, often with children. Others are more casual and can involve much less of a commitment than marriage.

Yet when it comes to dividing property, if a couple have lived together for three years, they will be treated exactly like a married couple.

Many will be caught. A young person buying his or her first home decides to get a flatmate to help to pay the mortgage. Initially, their relationship is platonic. It then develops into a sexual relationship and they start living together. If they satisfy the criteria under the act three years later, the owner could lose half the property to the flatmate. That is something the property owner is unlikely to be expecting.

Having a sexual relationship is not essential to be living as a couple under the act. Opening a bank account together to pay general living expenses or appearing to commit to a shared life are other factors the court can take into account.

This widens the net. A widow and widower decide to live together for security and friendship. They could live into their 80s or beyond until one of them dies. After three years the property they occupy is presumed to be owned by them equally.

This couple might not realise that their wish for companionship in their golden years could result in their children being disinherited by up to half of their original inheritance. Chances are they have made wills leaving their property to their children. But under the new law those wills can be rewritten by the courts.

Determining if a de facto relationship exists is a critical part of the Property Relationships Act. So, too, is the date when that relationship started.

Everyone knows their marriage date. But recalling the exact date a de facto relationship started is not so easy. People often drift into de facto relationships. It is not always a public event like marriage.

But it's now vitally important. Three years into the future, serious consequences flow from the relationship's starting date - the sharing of property, half each.

Implementing laws to deliver social justice is necessary in a modern democracy. But it is essential and fundamental to sensible lawmaking to analyse the benefits and weigh those benefits against any detriment a proposed law can create.

The one-size-fits-all approach to every de facto relationship in the Property Relationships Act has an alarming potential to create injustice. For a large number of people entering a relationship, signing a property-sharing agreement contracting out of the provisions of the act is all but essential.

An amendment to the act requiring all de facto couples to sign a public register before the three-year qualifying period starts would help. Signing a register would signal an intended long-term commitment to each other and alert couples to the legal consequences that follow. At least that would reduce the involvement of lawyers and the courts and help to reduce the erosion of property rights.

The Property Relationships Act is a classic example of lawmakers trying to resolve one problem and ending up creating many new problems.

True, the law will provide property protections for people in long-term de facto relationships that break down, particularly where there are children. This is a good thing.

But the new law will catch many other situations within its widely drawn net. Regrettably, it will end up creating more problems than it resolves.

* Patricia Schnauer is an Auckland barrister and solicitor.