Tenants in Common or Contracting Out Agreement?

Tenants in Common or Contracting Out Agreement – which is the right one for you?

If you are in a relationship and want to protect your property, or your share in it, from your partner in the event of separation or death, it is important to understand your legal options. Two commonly used tools are owning property as tenants in common and entering into a contracting out agreement. While both can play a role in planning, they offer different types of protection, and only one will provide full certainty if your goal is to keep your property separate.

When two or more people own a property as tenants in common, each person holds a defined share. These shares can be equal or unequal, depending on how the purchase was arranged. If one co-owner passes away, their share forms part of their estate and is dealt with in accordance with their Will. Some people believe that owning property this way will prevent a partner from making a claim after death. However, this is not necessarily the case.

Under New Zealand’s Property (Relationships) Act 1976, a surviving partner can still make a claim against your estate for a share of the relationship property, even if your Will states otherwise. This means that even with a tenants in common arrangement, your partner may still be legally entitled to part of your share, depending on the length and nature of the relationship.

If your aim is to keep your property separate and protected from a future claim by your partner, the more secure approach is to enter into a contracting out agreement (also known as a prenup). This is a legally binding document that allows you and your partner to agree on how your property should be treated if the relationship ends or if one of you dies. You can clearly state that specific assets, such as your home or your share of a property, are to remain your separate property.

A contracting out agreement offers far greater certainty than relying on legal title or ownership structure alone. It is the only way to contract out of the equal sharing rules set out in relationship property law. Without it, even your best intentions may be overridden by the law in the event of your death.

If you want to ensure that your property is protected and your wishes are followed, speak to our friendly team. We can guide you through the process of preparing a contracting out agreement that meets your needs and gives you peace of mind for the future.