Contracting Out Agreements in New Zealand: The Section 21 Requirements

A contracting out agreement is a written agreement, made under section 21 of the Property (Relationships) Act 1976, that lets a couple set their own rules for property instead of relying on the Act's default 50/50 sharing regime. This page explains what these agreements do, the strict requirements for one to be valid, and when a court can still set one aside.

This is general information about New Zealand law, not legal advice. For your own situation, consult a lawyer or your local Community Law centre.

What a contracting out agreement does

Section 21 of the Property (Relationships) Act 1976 lets couples, and people intending to enter a relationship, agree how their property is to be classified, owned, and divided, instead of relying on the Act's general rules. An agreement can deal with property either partner already owns, or property either of them may acquire in the future, and can cover the relationship while it continues as well as what happens if it ends.

Not only for couples about to marry

These agreements are often described informally as prenuptial or premarital agreements, but that description undersells what section 21 actually allows. An agreement can be made before a marriage, civil union, or de facto relationship begins, at any point during the relationship, or close to its end, so a couple who never made one before moving in together, or before marrying, can still put one in place later.

The requirements for a valid agreement

Section 21 sets out formal requirements, and an agreement that does not meet them is generally void. The agreement must be in writing and signed by both parties. Each party must have received independent legal advice before signing. Each party's signature must be witnessed by a lawyer, and that lawyer must certify, in the agreement itself, that before their client signed it, they explained to that client the effect and implications of the agreement.

Because both signatures need to be witnessed and certified by a lawyer for that party, an agreement generally cannot be validly made without two lawyers involved, one for each partner.

What independent legal advice means in practice

Independent legal advice generally means each partner instructs their own lawyer, and that the lawyers are not from the same firm, so that the advice each partner receives is genuinely independent of the other side. A lawyer advising a partner on a contracting out agreement will typically go through the agreement's terms and their client's rights under the Act, and may recommend changes, before certifying that they have explained its effect and implications.

When a court can still set an agreement aside

Meeting all of section 21's formal requirements does not make an agreement immune from challenge. A court can set an agreement aside if giving effect to it would cause serious injustice, taking into account factors such as the terms of the agreement, how long ago it was made, whether it was unfair or unreasonable when it was made, and whether it has become unfair or unreasonable because of a significant change in circumstances since.

Courts have generally treated this as a high threshold. A financial imbalance between what an agreement provides and what a partner might otherwise have received under the Act is not, by itself, enough to have an agreement set aside; something closer to serious injustice, on the specific facts, is required.

Related New Zealand family law topics

A contracting out agreement is what displaces the Act's default position on equal sharing. See the 3-year rule for relationship property for how that default position works when there is no agreement in place, or the family law hub for the wider picture.