Protecting Your Property and Assets When Buying Your First Home

Whether you're buying with a partner, receiving financial help from family, or purchasing on your own, understanding the legal tools available to safeguard your property and assets is essential. This guide will walk you through the key considerations and protections available to first-home buyers in New Zealand.

Why Asset Protection Matters

Your first home represents years of hard work, savings, and planning. Protecting it ensures that your contributions are recognised and preserved in the event of a relationship breakdown, that family gifts or loans are repaid or returned if circumstances change, that your personal assets are shielded from potential claims or disputes, and that you have clarity and peace of mind about ownership and entitlements. While it may feel uncomfortable to discuss these topics with a partner or family, taking proactive steps to protect your assets is not a sign of distrust - it's a responsible and practical approach to managing your finances.

Key Legal Protections for First-Home Buyers

1. Relationship Property Agreements (Contracting Out Agreements)

Under the Property (Relationships) Act 1976, relationship property is generally divided equally between partners if a relationship ends. However, this default rule may not always reflect the reality of your situation, especially if one partner contributes significantly more to the deposit or mortgage payments, the property is purchased with financial help from one partner's family, or you want to protect assets you owned before entering the relationship.

You should consider a contracting out agreement before or during a relationship (including marriage or civil union), if one partner is contributing a larger deposit or receiving financial assistance from family, if you want to protect specific assets such as inheritance or business interests, or if you're purchasing property together early in a relationship and want clarity on ownership.

There are important legal requirements to follow. Both partners must receive independent legal advice before signing the agreement, the agreement must be in writing and signed by both parties, and each party's lawyer must certify that they have explained the agreement and its implications.

2. Recording Family Contributions

Many first-home buyers rely on financial help from parents or family members to purchase their property. This assistance might come in the form of a gift or a loan. Either way, it's crucial to document the arrangement clearly to avoid disputes later.

Gifts vs. Loans:

• Gift: If the contribution is a gift, document it in writing and consider whether a contracting out agreement is needed to protect the gift in the event of a relationship breakdown.
• Loan: If the contribution is a loan, create a formal loan agreement that outlines the repayment terms, interest (if any), and what happens if the property is sold or the relationship ends.

Without proper documentation, a family contribution could be treated as a gift, making it subject to equal division under relationship property laws.

3. Trusts

A trust is a legal structure that can be used to hold and protect assets, including property. While trusts are more commonly used by established property owners or business owners, they may be relevant for first-home buyers in certain situations such as protecting inherited wealth or family assets, shielding property from potential creditors or legal claims, or planning for long-term wealth preservation and estate planning.

There are important considerations to keep in mind. Trusts can be complex and costly to establish and maintain, and they may affect your ability to qualify for certain home loans or first-home buyer grants. Recent changes to trust laws in New Zealand have also increased transparency and reporting requirements. If you're considering a trust, seek advice from a property lawyer or trust specialist to ensure it's the right option for your circumstances.

4. Joint Ownership Structures

When buying property with a partner or another person, you'll need to decide how the property will be owned. In New Zealand, there are two main forms of joint ownership:

• Joint Tenancy: Both owners have equal rights to the entire property. If one owner dies, their share automatically passes to the surviving owner.
• Tenancy in Common: Each owner holds a specific share of the property (e.g., 50/50, 60/40). If one owner dies, their share passes according to their will or the law of intestacy.

Which Is Right for You?

• Joint Tenancy: Often preferred by married couples or those in long-term committed relationships.
• Tenancy in Common: Better suited for buyers with unequal contributions or those who want control over what happens to their share.

Your lawyer can help you decide which ownership structure best reflects your situation.

Common Scenarios and How to Protect Yourself

Scenario 1: Buying with a Partner (One Partner Contributes More)

If one partner is contributing a larger deposit or making higher mortgage payments, consider a contracting out agreement to reflect the unequal contributions, and tenancy in common ownership to allocate shares proportionately.

Scenario 2: Financial Help from Parents

If your parents are providing a deposit or guaranteeing your loan, document whether the contribution is a gift or a loan. If it's a loan, create a formal agreement with clear repayment terms, and consider a contracting out agreement to protect the contribution in case of relationship breakdown.

Scenario 3: Buying on Your Own

If you're purchasing property independently, ensure the property is registered in your name only. If you enter a relationship later, consider whether a contracting out agreement is needed to protect your pre-relationship property.

Practical Steps to Protect Your Property and Assets

1. Seek Legal Advice Early: Before purchasing property, consult with a property lawyer to discuss your situation and explore your options.
2. Document Everything: Keep records of deposits, loan agreements, family contributions, and mortgage payments.
3. Communicate Openly: Have honest conversations with your partner and family about financial contributions and expectations.
4. Review Your Agreements Regularly: Life circumstances change. Review your contracting out agreement, ownership structure, and other legal arrangements periodically to ensure they still reflect your situation.
5. Update Your Will: Make sure your will reflects your wishes for your property and assets.

The Cost of Not Protecting Your Assets

Failing to take steps to protect your property and assets can lead to unfair division of property in the event of a separation, loss of family contributions that were intended to be repaid or protected, expensive and stressful legal disputes, and financial uncertainty and emotional distress. The cost of setting up a contracting out agreement or formalising a loan agreement is a small investment compared to the potential financial and emotional toll of a dispute.

Final Thoughts

Protecting your property and assets when buying your first home is about more than just legal paperwork - it's about ensuring fairness, clarity, and peace of mind for everyone involved. By taking proactive steps, you can safeguard your investment and focus on enjoying your new home.

Whether you're buying with a partner, receiving family assistance, or purchasing on your own, working with a property lawyer is essential. They can help you navigate the legal complexities, tailor agreements to your circumstances, and protect your future.