Friends with benefits can have its disadvantages

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Couples who are planning to move in together, or already live together, now more than ever need to understand the implications this has for separate property rights.

A recent Court of Appeal of appeal case Sutton v Bell [2021] NZCA 645 has clarified that if a couple is even “in contemplation” of a de facto relationship, a court has the ability to set aside a disposition of property (e.g. to a trust) when the person knew it would defeat a partner’s claim or rights.

In this case, a property was put in a family trust for the purposes of asset protection about eight months after the partner moved in as a flat mate. The Court said that even though the couple didn’t yet qualify as a “defacto couple”, the court could nevertheless set aside the transfer to the trust because they were “in contemplation” of a de facto relationship. 

A couple is presumed to be “in contemplation” of a de facto relationship when they mutually contemplate living together “as a couple.” Moving in together is one of a number of indicators a Court will look at in deciding whether a couple is “living together as a couple”. So flat mates who are also in a sexual relationship (“friends with benefits”) may not be living together “as a couple.”   

Interestingly, despite living together, the Court in this case held the couple were not in a de facto relationship until later when there were additional indicators of a mutual commitment to a shared future – in this case a holiday together and conceiving their first child.

However importantly, the law is now clear that it is not a requirement to be in a de facto relationship to receive protection for, or be subject to claims against, dispositions of land. If you think you may be affected and would like more clarity than this couple had, speak to a relationship property lawyer at Henderson Reeves.