One of the first steps you should consider, when separating with your spouse or de facto partner, is to protect any interest you have in real property (for example, your family home) of the relationship. One way you can protect your interest in any real property that is not registered in your name is with a caveat.
Often real property (real estate or land) is held in the sole name of a spouse, de facto partner or a corporate entity. This is done for many reasons including for tax purposes, asset protection or simply, the property was purchased before the commencement of the relationship. This article will look at how a caveat may assist in protecting your interests.
What is a caveat?
A caveat is a document that can be lodged with the Titles Office in your State. In Western Australia it is Landgate and in New South Wales it is NSW Land Registry Services.
A caveat is lodged on the certificate of title for that property. The certificate of title is the main title document that records all interests in that property.
Once a caveat is lodged it does not actually create an interest in property. It protects that property from being dealt with in any way including selling, transferring or further encumbering the property until that caveat is removed.
A caveat not only prevents the legal owner from dealing with that property, it is a notice to any third party (e.g. a financier looking to issue a mortgage over the property) that the caveator (the person lodging the caveat) has an interest in that property.
Can anyone lodge a caveat?
In short, no.
There are risks, including financial penalties if a caveat is lodged inappropriately.
Prior to a caveat being accepted for lodgement, the person lodging the caveat must be able to demonstrate that they have a “caveatable interest” in that property.
A caveatable interest can be either a legal interest or equitable interest in that property. A caveatable interest may arise in a number of circumstances; for example, from a registered mortgage or a contract.
A marriage or a de facto relationship does not automatically provide a right to a caveatable interest in property.
In a family law context, an equitable caveatable interest may arise during property settlement negotiations due to a party’s financial or non-financial contribution towards property. This may include financial support towards the mortgage or liabilities of that property or from providing maintenance or improvements (i.e. undertaking renovations) to the property.
When a caveat may be appropriate
If real property is owned in joint names, a caveat is unlikely to be necessary, as any dealings in that property (e.g selling or mortgaging) will not be able to occur without both owners signing the relevant documentation.
However, if real property is owned by only one spouse or by a corporate entity, depending on the circumstances, it may be wise to lodge a caveat to ensure that property is not sold or mortgaged without the other party’s knowledge.
In family law property settlements, real estate is often one of the most valuable assets of the relationship. Ensuring any real property is not sold or otherwise disposed of without the knowledge of both parties should be a primary consideration.
Advantages and risks of caveats
Caveats can be a cost-effective and readily accessible means of protecting interests in property; particularly during property settlement after separation.
Provided a caveatable interest in the property can be established and the caveat is lodged for a proper purpose, a caveat can be lodged in a time effective manner to prevent the disposal or otherwise dealing in real property.
If a caveat is lodged over real property and it is found the caveator did not have a proper basis or they did not have a caveatable interest, the caveator may be liable for any damages incurred by the legal owner if they have suffered a financial loss as a consequence of the caveat.
Parties should be mindful that caveats that are lodged without a proper purpose, for example for strategic or bargaining purposes, they run the risk of the caveat being found to be inappropriate and subsequently being removed. This exposes the caveator to a potential claim for damages from the legal owner.
Should I lodge a caveat after separation?
If you become aware that a former spouse or partner is considering selling, or is in the process of selling or mortgaging any real property which you consider you may have a caveatable interest in, and you are not the registered legal owner on the certificate of title of that property, you should consider seeking urgent legal advice as to your options to protect your interest in that property.
The team of Meillon & Bright Legal will be able to assist you based on your personal circumstances and advise you whether a caveat is suitable or what other options are available to you to protect any interest you have, or may have, in that property.
About the Author
Today’s article is written by family lawyer Matt Kinder. You can learn more about Matt’s expertise and experience here or get in touch with him directly about your family law matters.
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The information contained in this article is of general nature and should not be construed as legal advice.