New Zealand’s highest appellate court, the Supreme Court, has recently delivered its decision in Rose v Rose. The case is about the classification of property. The Property (Relationships) Act 1976 (‘the Act’) defines relationship property and separate property. Relationship property is the pool of common property and at separation it is to be divided equally, unless there are extraordinary circumstances that would make equal sharing repugnant to justice. However, Rose v Rose exemplifies how there are also pathways whereby separate property becomes relationship property. Relationship Property Relationship property as defined in the Act includes: • the family home – whether acquired before or during the relationship • family chattels – whether acquired before or during the relationship • all property jointly owned • property owned immediately before the relationship began, if it was acquired in contemplation of the relationship and it was intended for the common use or the common benefit of the partners • all property acquired after the relationship began, unless it is separate property (s9 and s9A) or the succession, survivorship, trust and gift provisions (s10) • increases or gains in relationship property, subject to exceptions • increases in the value of one partner’s separate property, if the increase is attributable to: o the use of relationship property o the direct or indirect actions of the other spouse or partner Separate Property Separate property is defined in the Act as being any property that is not relationship property. Rose v Rose The basic approach of the courts has been that if the non–owning partner contributes to an increase in the value of the other partner’s separate property that increase in value becomes relationship property. In this case, Mr Rose’s separate property included a farm that he owned prior to the marriage. Mrs Rose sought to share the increase in the value of the farm at the date of separation. Mrs Rose argued that during the course of the marriage relationship her outside earnings combined with her duties as a homemaker enabled her husband to keep his farm and develop it into a vineyard. During the term of the marriage relationship the farm appreciated in value significantly due to inflationary pressures and its location within a prime grape region in Marlborough. The Court accepted Mrs Rose’s argument and held that Mrs Rose was entitled to a 40% share in the increase in the value of the separate property. Mr Rose was given a 60% share giving him greater credit for the inflation and general increase in the value of the land. It is considered a landmark decision because despite the apparent indirectness of Mrs Rose’s contributions, she was awarded a 40% share of the increase in the value of the separate property. A Suggestion One way you may possibly prevent separate property becoming relationship property is to record it in a section 21 Agreement, which also specifies that no matter what the contributions made to the relationship by the other partner during the life of the relationship, it is to remain separate property.