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Relationship Property, Trusts

Forced sale of trust owned property following relationship split

As has been discussed in a number of previous blog posts, relationships and trusts make poor bedfellows.  One of the difficulties that can be encountered is that the division of property, that would otherwise fall to be determined in accordance with the Property (Relationships) Act 1976, can be somewhat less straight-forward when what you are dealing with is the practical realities of co-owners who cannot agree on how to deal with  property that is owned as tenants in common.    That is each owner owns a recorded share of the property. 

One remendy that can be available in this situation is that provided by the Property Law Act 2007.  Where such an application is considered, matters taken into account include:

  • the extent of co-ownership
  • the number of co-owners
  • the nature and location of the property
  • the extent of hardship to the aplicant if the order is refused, compared with the hardship to the co-owner or co-owners if the order is made
  • the value of respective constributions

The court takes a pragmatic view of matters and is not constrained by matters such as those that might apply of the matter was heard under the relationship property legislation, even if the trust owned property was a family home for spouses or partners.

Usefully the court also has the power to order occupation rent.  This can be a practical remedy when only one trust has had the effective benefit of the property due to the break-down of the relationship between the beneficiaries of the respective trustee owners.

However, a far more cost effective solution could be achieved if any property owned by multiple trustee owners is subject to a property sharing agreement that determines amongst other things, what will happen to the property if the parties separate.

References:

  • Fuller v Smeets [2013] NZHC 1283
  • Dyas v Elliott [2010] NZHC 607
  • Property Law Act 2007, s 339 – 343
  • Proeprty (Relationships) Act 1976

 

 

Discussion

2 thoughts on “Forced sale of trust owned property following relationship split

  1. Question: When my now husband and I first got together I signed a Property Sharing Agreement saying that the Trust property remained his should we ever separate. About 8 months later I became a Trustee of that Trust. I am also a Discretionary Beneficiary. We then married, he adopted my son; and we had a daughter together. Some 11 years later we have separated and are trying to sort an amicable settlement. My question is, with me now being a Trustee of that Trust, does that make any difference to the Property Sharing Agreement? AND am I, as Trustee, able to force the sale of the Trust properties? Would appreciate your advice?

    Posted by Wendy | December 21, 2016, 12:58 am
    • Thank you for your e-mail. The interrelationship of contracting out agreements and trusts is complicated and fact specific. See for example Clayton v Clayton [2016] NZSC 29 and Clayton v Clayton [2016] NZSC 30. Legal advice is recommended. Please feel free to e-mail me (vicki@vatl.nz) if you would like to discuss this further.

      kind regards,

      Vicki Ammundsen

      Posted by vickiammundsen | January 1, 2017, 11:52 pm

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