Breaking up is hard to do

The Law Commission last week released its final review on the Property Relationships Act (1976). That Act was a revolution in how property is divided after a break-up.

But times have changed and the commission, which has been reviewing the Act since May 2016, has proposed modifications. Some of the 140 recommendations are significant.

Justice Minister Andrew Little has tabled the report in Parliament, and the Government will give the advice further consideration.

Change is overdue and most proposals seem sensible. New Zealand is fortunate to have an institution like the Law Commission which, in a relatively disinterested and thorough way, can examine important matters.

Inevitably, because of the complexity and vast differences in relationships, there will be anomalies and unfairness whatever is decided. There is also the tricky balance between simple rules - like the 50-50 split in assets - and dealing with some of the worst unfairness.

Most people are aware of horror stories about houses and split relationships. The classic is where one partner enters with lots of assets, including perhaps a house or large amounts of superannuation, and the other partner very little. After just three years, they separate and half of the house is transferred.

There are variations on this as the likes of farms, inherited properties and gifts enter the mix.

It is all very well to claim pre-nuptial agreements should be an answer. But in both the flush of excitedly living together or in gradual de facto arrangements, such contracts seem too cold and clinical or are overlooked. As well, a more dominant partner might make it unlikely the other person could pursue the issue.

Only about 6% to 7% of relationships include pre-nuptial agreements, according to a University of Otago study. Some pre-nuptial agreements also can be overturned through legal action.

Submissions on the commission's earlier reports and a survey of public attitudes question the fairness of the current rules. In some cases, the injustices are considered blatant.

The commission proposes that when one partner brings the home into the relationship, only the increase in the value of the house be part of the shared property to be split. The home, however, would be considered partnership property as it becomes a family home.

Superficially, this seems much fairer, and it could well be an overdue improvement. Immediately, however, questions are raised. There is ambiguity over when the house becomes a family home, whereas the present system is cut and dry. If the couple buys a new house, that becomes partnership property.

But what if the new house is bought largely from the assets of one partner and not long after they are together? What about the place of money from the family of one partner, more common in these days of high house prices? What if it is not clear if this money is a loan or a gift?

The proposals do away with spousal maintenance and introduce income sharing for up to five years after a split. This is to help support partners who gave up work to raise children. It looks a promising way to compensate the partner who might have interrupted a career. Again, though, there will be fishhooks.

Trusts as a means to exclude assets from potential splits would be undermined, and children given more importance. The main caregiver would have more rights to stay in the family home for a period after separation. This could save disruption and stress on the children.

Relationship property is a minefield. Blended families and safeguarding children's inheritances from earlier relationships are among other issues.

Mr Little's ministry now has the task to come up with improvements. Although they are overdue, that will be difficult.