Alana Crampton on Contracting Out Agreements in Farmers Weekly

Never to late for farming couples to sign a ‘pre-nup’

Lawyer warns about complexity of disentangling finances when couples who are splitting are also farm business partners.

Rural partnerships that extend beyond business and into the bedroom demand more openness on how to deal with their demise, should the time come.

Tavendale and Partners senior partner Alana Crampton said having navigated the June 1 start of the farming year, farming partners should now have an honest conversation about how farm business wealth would be distributed should the relationship fail.

Divorce rates in NZ have fallen from a peak of 17.1 per 1000 in the early 1980s to only a third of that today. This has accompanied a decline in formal marriages each year, falling from 27,000 at their peak in 1971, to 18,700 in 2023.

This steady decline may reflect a shift in relationship types but not in the law surrounding relationship assets. 

The Property Relationships Act (1976) maintains equal sharing of assets if partners, married or not, have been in a relationship. 

Crampton said farming couples breaking up, even if they are not in a conventional marriage, brings another level of complexity with their farm business assets entwined. 

She said she is witnessing up to 80% more farm business relationship break-ups than 10 years ago. 

“Their business is 24/7, high stress, often worked in together. 

“There is also a recognition there’s a lot at stake in what are now usually multimillion-dollar enterprises and neither party may be prepared to give their share up.”

She said dairy farm businesses bring another level of pressure, with increased compliance and employment issues as constants.

Often the relatively good cashflow levels mean couples may have spent freely and the reality of splitting up, losing that income level and asset base can hit hard.

“Now June 1 contracts are settled, and people are in place it’s a good time to take a step back and ensure they are covering themselves in event of a break-up. 

“Front footing this involves writing up a contracting out agreement, previously a ‘pre-nup’, clearly acknowledging who invested what into the business and when.

“It’s a hard conversation to have, but you may as well rip the Band-Aid off and have it earlier than later before the farm year gets really busy again.”

Crampton said things can get extra complicated when the “bank of Mum and Dad” has become involved. 

“And if it’s a family farm business, the issue of farm succession can become part of the break-up complexity. 

“One party has come into the business outside of the family and no one wants to be in the position of having to sell the family farm to pay someone out.”

She cautions that even with clear agreements, settlement can take time given the seasonality of farming, and relative lack of cash.

“And even on lo-geared farms, banks are applying more pressure. You can’t just go and draw on another million dollars to the loan to pay someone out.”

She is seeing more contracting out agreements, partly  prompted by a generation of more empowered female partners bringing not only substantial assets to relationships but a mindset that values their blood, sweat and tears.

“The days of wheeling wifey around to sign it at the lawyer’s office are well and truly over, thankfully.”

Read the full Farmers Weekly article here:
Never to late for farming couples to sign a ‘pre-nup’ 

For more listen in here:

The Rural Roundup – Tavendale & Partners - Alana Crampton on the Property Relationships Act