Contracting Out Agreement (Prenuptial Agreement) — New Zealand

A Contracting Out Agreement (Prenuptial Agreement) in New Zealand records how a couple agree to divide their property and finances if the relationship ends, intended to be binding under the Property (Relationships) Act 1976.

The Property (Relationships) Act 1976 applies to married couples, civil union partners, and de facto couples who meet the definition of a qualifying de facto relationship. The default rule under the PRA is that relationship property — broadly, property acquired during the relationship — is divided equally between the partners on separation. This can include the family home (regardless of whose name it is in), KiwiSaver contributions made during the relationship, vehicles used by the family, and much more. A Contracting Out Agreement allows couples to modify these default rules to suit their specific circumstances.

Contracting Out Agreements are particularly valuable when one or both parties have significant assets before the relationship begins (such as real property, business interests, investments, or an inheritance), when one party has children from a previous relationship whose interests should be protected, when there is a significant disparity in wealth between the parties, or when the parties simply want clarity and certainty about their financial arrangements from the outset.

The PRA's mandatory requirements for a valid Contracting Out Agreement are strict. The agreement must be in writing, signed by both parties in the presence of a witness, and — most importantly — each party must have received independent legal advice from their own separate lawyer before signing. Each lawyer must provide a signed certificate confirming that they have explained the effect and implications of the agreement to their client and advised the client of their rights under the PRA. Without these certificates, the agreement is not enforceable under section 21F of the PRA.

New Zealand family courts treat Contracting Out Agreements with respect but will set them aside if they would cause serious injustice (s21J PRA), particularly if there has been inadequate financial disclosure, undue influence, or a major change in circumstances. Contracting out agreements in New Zealand must comply with the strict formal requirements of section 21 of the Property (Relationships) Act 1976 (PRA 1976). Section 21F of the PRA 1976 requires that before signing a contracting out agreement, each party must receive independent legal advice from a different New Zealand solicitor, and each solicitor must certify on the agreement that they have explained the effect and implications of the agreement to their client.

A Contracting Out Agreement is most commonly made before marriage or civil union, but the PRA allows such agreements to be made at any time before, during, or after a relationship. There are several key situations where entering into a Contracting Out Agreement is especially prudent.

Before a first marriage or civil union, a Contracting Out Agreement is valuable if either party owns significant property, has business interests, or has accumulated substantial KiwiSaver or investment funds. Protecting these pre-relationship assets from automatic equal division in the event of separation provides security and clarity for both parties.

Second and subsequent marriages or civil unions present even stronger reasons for a Contracting Out Agreement. People entering a second relationship often have assets accumulated over years and may have children from a previous relationship whose inheritance rights should be protected. Without a Contracting Out Agreement, relationship property default rules could significantly affect the estate passed to children of earlier relationships.

De facto couples who cohabit for three years or more in New Zealand are subject to the same PRA rules as married couples. A Contracting Out Agreement provides the same protection for de facto partners as for those who are married.

Business owners should strongly consider a Contracting Out Agreement to protect their business interests from becoming relationship property — or at least to provide a fair mechanism for valuing and dividing any business interests that may be relationship property.

The agreement should be prepared well in advance of any wedding or planned commitment, allowing both parties sufficient time to take independent legal advice and negotiate terms without time pressure, which could otherwise be cited as undue influence. New Zealand lawyers recommend that Contracting Out Agreements be reviewed periodically throughout the relationship, especially when circumstances change significantly.

A legally valid and effective New Zealand Contracting Out Agreement under the Property (Relationships) Act 1976 requires several key components.

Identification of the Parties clearly names both partners, their addresses, and their occupations. The nature of the relationship — whether intending to marry, married, in civil union, or in a de facto relationship — is specified, along with the relevant dates.

The Separate Property Schedule is central to most Contracting Out Agreements. It lists, for each party, property that is to remain separate and will not be subject to equal division under the PRA. This typically includes real property owned before the relationship, inheritances, gifts from third parties, and specific financial accounts or investments.

The Relationship Property Division Clause describes how property acquired during the relationship will be divided on separation. The default PRA position is equal division, but the parties may agree on a different formula — for example, a sliding scale based on the duration of the relationship, or specific rules for particular assets such as the family home.

Provisions on Death deal with how property will be treated if one partner dies during the relationship. This clause interacts with each party's Will and should be considered in the context of the Family Protection Act 1955 obligations.

The Independent Legal Advice Certificates are mandatory under section 21F of the PRA. Each party's lawyer must certify in writing that they have explained the agreement and its effect to their client and advised the client of their PRA rights. These certificates are signed by the lawyers and attached to the agreement.

The Governing Law and Variation Clause confirms New Zealand law governs the agreement and specifies that the agreement can only be varied or revoked by a further agreement in writing meeting the same PRA requirements, preventing informal modifications that could create uncertainty. The forms-legal.com Contracting Out Agreement (Prenuptial Agreement) — New Zealand provides a ready-to-use template that meets New Zealand legal requirements. Additional provisions for New Zealand prenuptial (contracting out) agreements include: a clause identifying each party's separate property at the date of the agreement, which will remain separate property regardless of the length of the relationship; a clause addressing the KiwiSaver funds of each party, which are relationship property under the PRA 1976 after the relationship commences; a clause addressing jointly owned real property, including any existing mortgage obligations; a clause addressing superannuation entitlements that may accumulate during the relationship; and a review clause providing for periodic review of the agreement, particularly if circumstances change materially (such as the birth of children, a significant change in either party's financial position, or a substantial inheritance). Section 21J of the PRA 1976 preserves the Family Court's power to set aside an unfair contracting out agreement.