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“…It’s a simple agreement so why is it so involved?”

October 22, 2013

Fish jumpingI have lost count of the times I have had a prospective client approach me to help with their relationship property division which they are quick to claim is “pretty simple”. Often, the client is correct and the division is straight forward and the parties reach agreement relatively easily. Other times, they are woefully wrong and their relationship property matter is a minefield of legal or negotiation complexities they never envisaged.

Even if your asset base is straight forward and you and your spouse have been able to quickly reach agreement together over coffee, formalising that agreement won’t be as simple as walking into your lawyer’s office together, signing an agreement and walking out again. There are some hoops to jump through.

New Zealand’s relationship property law, the Property (Relationships) Act 1976, sets out some important criteria that need to be met in order for an agreement as to property sharing, whether it be a pre-nuptial agreement or one entered upon separation, to be valid and enforceable. If those criteria are not met, you could later face a claim that the agreement should be set aside or declared void. Merely agreeing on your property division at your kitchen table is unlikely to satisfy these criteria and will leave you vulnerable to future claims.

What are those requirements?

Firstly, your agreement needs to be in writing and needs to be signed by both of you.

Secondly, you and your spouse each need to receive independent legal advice from a lawyer. You cannot use the same lawyer. The lawyers you and your spouse use must be truly independent of one another and cannot work in the same firm.  Upon providing you with independent legal advice about the effects and implications of the agreement, your lawyer will sign a certificate within the agreement to confirm the requisite advice has been provided. The agreement can be overturned by a Court if it later decides your lawyer or your spouse’s lawyer has failed to properly and fully advise about the Agreement.

Thirdly, your signature on the agreement must be witnessed by the lawyer who has provided the certificate as to independent legal advice. You cannot receive independent legal advice from your lawyer and then have your next door neighbour witness you signing the agreement.

Of these requirements, it is the need for independent legal advice that usually causes clients the most frustration. While most people seem to readily accept the need to each engage their own lawyer, frustrations can arise around what the lawyer requires in order to properly provide advice about the proposed agreement.

Generally, your lawyer should be advising you about what you could expect to receive if your property is divided in strict accordance with our relationship property laws and about how this differs (or not) from what you stand to receive under the proposed Agreement.  I generally like to show this to my client in the form of a calculation that sets out “the bottom line” – what they could expect to receive under the Act and then show them how this compares to a calculation of what they are actually receiving under the Agreement. My client can then make a very real comparison of the two in dollar terms and assess whether he or she wants to proceed with the agreement.

The obligation on lawyers when providing advice about relationship property agreements is an onerous one. In order to provide full and proper advice about an agreement, both lawyers will seek information and disclosure of all the property that each party has an interest in. In a number of cases where agreements have been overturned for lack of sufficient legal advice, the Court has done so because a lawyer hadn’t obtained sufficient valuation information. The Court has been unable to see how the lawyer, in the absence of valuation information, could possibly have been able to advise his or her client about the settlement contained in the agreement and how it measures up against the client’s legal entitlements.

The information and documents you will likely be asked to provide include valuations of all your assets, bank statements (sometimes going back a considerable time period), life insurance and superannuation information, financial statements for any businesses, documents about any family trust, mortgage and credit card statements.

In some situations, gathering and providing the information for your lawyer can meet more than one need. If one of you is borrowing funds to buy the other one out, it is more likely than not that the lending bank or financier will require, as a condition of it lending the money, evidence of the value of the property as well as a properly completed Relationship Property Agreement.

I can well understand the frustration of thinking you’ve reached agreement with your spouse only to discover there are several hoops to jump through in order to finalise that agreement. However, if I am not mistaken, you want your property division sorted, you want certainty about your financial future moving forward and you want to be able to enter into future financial decisions relying on knowing the relationship property agreement is going to endure. To achieve this, it is best to accept the reality of what the law requires, get good advice, don’t give into the temptation to try to take shortcuts and provide what is asked of you quickly. This will minimise delays, keep your costs down and reduce the risk of your Agreement being overturned later.

Need help with a relationship property issue? Find out more about how the team of specialist family lawyers at Family Law Results can assist you at www.familylawresults.co.nz

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