The Property (Relationships) Act 1976

November 2001

1. The New Legislation

Everybody living in a relationship will potentially be affected when the Property (Relationships) Act 1976 comes into force in February next year. The Act will dramatically extend the property division rights for married, de facto and same sex couples.

2. Who is covered by the Act?

One of the most significant changes under the new Act is that married, de facto and same sex relationships are all provided for under a single regime. Previously only married couples were covered. Hence, the term "matrimonial property" is replaced with "relationship property".

The Act sets out factors to determine whether two people are in fact in a de facto relationship. These include being over 18 years old and living together as a couple for at least three years.

The definition of marriage has also been extended. If the marriage was immediately preceded by a de facto relationship, that relationship must be treated as if it were part of the marriage.

3. Division of relationship property

On the division of relationship property each spouse or de facto partner will be entitled to share equally in the family home, the family chattels and any other relationship property. However, there is an exception to this presumption of equal sharing. If the Court considers that there are extraordinary circumstances that make equal sharing "repugnant to justice" then the share of each spouse or de facto partner will be determined in accordance with their contribution to the marriage or relationship. The Act clearly states that there is no presumption that a contribution of a monetary nature is of greater value than a contribution of a non-monetary nature.

4. Contracting out of the Act

The Act generally takes effect from 1 February 2002 although spouses, de facto partners or anybody entering into a relationship have been able to opt out of the important provisions of the Act since August by making a formal agreement. The agreement can also specify the share of the relationship property that a surviving spouse or partner and the deceased's estate is to be entitled to.

The Court can still set aside an agreement of this nature if it would cause "serious injustice".

Any matrimonial property agreements made under the old Matrimonial Property Act will be treated as if they were made under the new Act. We strongly recommend that anyone who has a matrimonial property agreement under the old Act needs to reconsider it in light of the new legislation.

In order to preserve assets against a relationship breakdown, people contemplating a de facto relationship should consider contracting out of the new Act.

5. The impact of the Act on Trusts

The Act allows the Court to intervene if relationship property has been disposed of into a trust to the detriment of the other partner or spouse. However, this does not apply to a trust established under a will or other testamentary disposition. The level of protection provided by trusts can be considerably enhanced if steps are taken to transfer assets prior to the commencement of relationships. We recommend that legal advice be sought to determine the implications under the Act of transferring assets to trusts before such transfers are made.

6. The application of the Act on death

A new feature under the Act is that where one of the spouses or partners has died, the surviving spouse or partner may choose:

1. to elect to make an application under the Act for the division of relationship property; or
2. to receive property under the will of the deceased spouse or de facto partner or on intestacy.

There are specified time limits and procedural requirements for making this choice. Generally, the choice must be made within six months of the grant of administration of the deceased's estate. The survivor is required to make the choice by written notice in the required form and this must be accompanied by a certificate from a lawyer saying that the effect and implications of the notice have been explained to the survivor. Once the survivor has made their choice, that choice cannot be revoked. If a survivor fails to make a choice they are treated as having chosen to take what has been left to them under the will.

We recommend that both married and de facto couples consider the implications of the Act on death and whether they want to use an agreement to set out what the survivor is entitled to on death. We also believe that it is crucial that married and de facto couples review their wills so that they take into account the implications of the Act.

7. Where to from here?

In light of the changes brought about by the Act, it is prudent that both married and de facto couples, or people contemplating entering marriage or de facto relationships, review their affairs to determine whether they are still appropriate.