Partners in a relationship cannot assume they will automatically obtain an interest in the dwelling used as their family home.
A recent High Court decision has highlighted the difficulty of establishing an interest in a property, where one partner has acquired the property prior to the relationship in the name of a family trust. In that case, the couple had resided in the Trust property during the term of their 4 year relationship until they separated. One of the partners then lodged a caveat against the title, claiming an interest in what she regarded as the family home. The Court decided that because the property was not owned by her partner, she needed to establish a constructive trust existed and that significant funds from his business had been applied to meet the cost of servicing the mortgage on the property. No clear evidence was established, and because she was unable to point to monetary contributions to either purchase the home or maintain the mortgage over the property, the Court ruled that her caveat must lapse.
It is likely that no such problem would have arisen had the couple addressed the issue of property ownership at the time they commenced living together in the property. A Property Relationship Agreement could have established the interest of the trust at the time of purchase, and treated this as free from claim. The agreement could also recognise that over time both partners would share any increase in the equity that would result from their sharing the mortgage payments and outgoings. A failure to discuss these issues can cause strain on the relationship, which would be avoided had a property sharing arrangement be entered into from the beginning.
The best way to ensure that both parties to a relationship feel valued and secure, is for them to be partners not flatmates, and for them to enter into a Property Relationship Agreement from the beginning. The law provides that each party must obtain independent legal advice before signing such an agreement, which gives both parties an opportunity to take advice on their property rights in the relationship
For advice on Property Relationship Agreements, please contact Gerry: Ph. 835 3069 or email gjs@slw.co.nz