One important consideration when separating with your spouse or de facto partner, is the protection of any interest that you may have in real property (for example, your family home) of the relationship.
What is a caveat?
A caveat is a statutory injunction which notifies others of your interest in a piece of land that can be lodged with the Land Titles Office in Victoria.
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being dealt with in any way including selling, transferring or further encumbering the property until that caveat is withdrawn, lapsed or cancelled.
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.
Should I lodge a caveat?
You should seek appropriate legal advice prior to lodging a Caveat on a property as there are significant risks, including financial penalties if a Caveat is found to have been 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 and may arise in a number of circumstances including but not limited to a registered mortgage or a contract.
It is important to note that a marriage or a de facto relationship does not automatically provide a right to a caveatable interest in property.
Risks of caveats
Provided a caveatable interest in the property can be established and the caveat is lodged for a proper purpose, a caveat can be a cost effective and readily accessible means of protecting a client’s interest or preventing the disposal of or otherwise dealing in real property.
If however 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.
When might a caveat be appropriate?
In a family law proceedings:
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.
Real estate is often one of the most valuable assets of the relationship. If real property is owned by only one spouse or by a corporate entity, depending on the circumstances, it ensuring any real property is not sold or otherwise disposed of without the knowledge of both parties should be a primary consideration.
If you are aware your former partner has intentions of selling a property which you have an equitable interest in but where you are not a registered owner, we strongly advise you to seek immediate legal advice that takes into account your unique circumstances.
When is a caveat not appropriate?
Lodging a caveat may not be the most appropriate course of action when considering your specific circumstances and there may be better solutions to protect your interests.
For example, if your former partner has an interested purchaser for their investment property and neither of you wish to retain that property, it may be wise for the parties to agree to sell the property and retain the proceeds of the sale in a trust account of the conveyancing solicitor until the family law property settlement is finalised.
Alternatively, to avoid any unnecessary risks associated with lodging a caveat, applying for an interim injunction Order under section 114 of the Family Law Act 1975 preventing one party from dealing with a particular asset, of their own accord and without the input or consent of the other party can be sought from the Family Court of Australia or Federal Circuit Court of Australia. It is also possible at this time to apply for other interim property orders for assets you wish to protect in your family law matter which are not real property.
Next steps
Ultimately, lodging a caveat may or may not be your best course of action in family law proceedings.
The best course of action is highly dependent on your personal circumstances. It is strongly advised that you obtain legal advice from us today as to whether a caveat is appropriate in your family law matter or whether an alternate option available to you to protect any interest you have, or may have, in a property is more appropriate.