Chinese parents paid outright for their daughter's home before her wedding, yet her European husband received a share on divorce! What does New Zealand law say?

Cherry immigrated to New Zealand with her parents as a child.

 

She married Peter, a New Zealand European, more than 20 years ago. Before the wedding, Cherry's parents paid outright for the couple's home, which was registered in her name.

 

Unfortunately, Cherry and Peter's relationship ran into difficulties about 1 year ago, and they have now separated.

 

What Cherry had not expected was that Peter would claim a share of their home and seek a division of the property.

 

To Cherry and her parents, the home was clearly property she owned before marriage. On what grounds could Peter claim a share of it?

 

Yet, to their surprise, the judge ruled that Peter was entitled to a share of the property's value.

 

To understand why, YIJU asked barrister Michael Kan Chen-Yu to explain.  

 

 

YIJU: There was no notarised premarital property agreement covering this home, but its settlement date and funding source establish that it was Cherry's premarital property. Why, then, did the court rule that Peter had an interest in it?

 

Michael Kan Chen-Yu: First, some Chinese people may think that because Cherry's parents provided the money to buy the property, their European son-in-law has no right to claim any interest in it.

 

But under New Zealand law, money transferred between parents and children is presumed to be a gift unless there is evidence otherwise, such as an IOU. The children are therefore entitled not to repay it.

 

{Ad}

In this case, the property was registered in Cherry's name, not her parents' names. As her husband, Peter could therefore potentially seek a division of their relationship property. 

 

YIJU: That is precisely what confuses us. Since the property was bought outright before the marriage, shouldn't it be Cherry's 'separate property'?

 

Michael Kan Chen-Yu: One principle governing the division of family property under New Zealand law is that gains made during a relationship should be shared equally.

 

In this case, the property was indeed Cherry's premarital property. But Peter argued that over their 20 years of marriage, he too had contributed to its maintenance and renovation. He was therefore entitled to seek a fair division of the increase in its value.

 

Over 20 years of marriage, the property had increased substantially in value. Although Cherry and Peter had contributed in different ways, it was difficult to put precise figures on their contributions. Peter's argument nevertheless had some merit, so the judge accepted it and ruled that he was entitled to a share of the increase in the property's value.

 

YIJU: Unless special circumstances under the relevant legislation apply, the general principle is that property accumulated by a family during a relationship is shared equally. Suppose Cherry and Peter had divorced for some reason just a few months after marrying. Would Peter then have been unable to claim a share of the home?

 

Michael Kan Chen-Yu: If the home was brand new when purchased, and Peter could not prove that he had contributed to increasing its value or had contributed to the family in other ways that enabled Cherry to retain it, the judge would probably not uphold his claim to a share of the property.

 

YIJU: Chinese parents traditionally help their children buy homes. Some families worry that a child's spouse could claim a share of the property on divorce, so they place it in a family trust and let their children live there rent-free. The aim is to prevent a spouse from claiming a share if the couple divorces. Is this a good approach?

 

Michael Kan Chen-Yu: It is one option. I have a different view of trusts, and personally consider signing a property agreement an option. But the best approach is for those involved to keep separate property and relationship property strictly apart, without mixing them.

 

Family trusts can also present problems. For example, is there still a mortgage on the property? If so, a child's spouse who helps repay it is entitled to seek a share of the property's value on separation, because they have contributed relationship property towards the mortgage repayments.

Even without a mortgage, living in a property involves maintenance and other expenses. A child's spouse can still use these contributions as grounds to seek a share of the property's value on separation. How much they receive depends on the individual case.

 

The simplest approach, and one less likely to lead to disputes, is for the parents, their child and the child's spouse to consult a lawyer and have a property agreement drafted. It should set out how property will be divided in the various circumstances that could arise on separation.

 

I understand that among Chinese people, discussing money can strain relationships. But a home is often a family's main asset. In a marriage, it is also easy to establish whether someone has contributed to a property, but difficult to quantify precisely how much. The principle is therefore that partners' contributions are not ranked by their size or amount.

 

For example, one person may contribute more to the deposit, while the other pays more towards the mortgage. Who, then, has contributed more to the property's increase in value? The longer a marriage lasts, the harder this question becomes to answer. If the couple cannot agree when they divorce, they can become embroiled in lengthy litigation over their assets.

 

That is why I believe the simplest approach is to sign a property agreement witnessed by a lawyer! Above all, remember to keep separate property and relationship property apart. Once they have been mixed, it may no longer be possible to separate out the individual property fairly.