What is a Caveat?
A caveat is a document any person with a legal interest in a property can lodge with Land Use Victoria. After registration, a caveat note appears on the title giving prospective buyers notice that a third party might have rights over the property.
Once a caveat is lodged it does not create an interest in property however, 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being dealt with in any way including selling, transferring, or further encumbering the property until that caveat is withdrawn, lapsed or cancelled.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, but it is also 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.
Who can lodge a caveat in Victoria?
When a purchaser signs a contract to purchase real estate, the purchaser acquires what is known as a “caveatable interest”. This means that the purchaser is entitled to register a caveat to protect that interest. There are specific grounds in relation to the property that must be met in order to lodge a caveat.
Power to lodge a caveat over land is given by s. 89(1) of the Transfer of Land Act (TLA). The existence of a marriage or de facto relationship does not give rise to a caveatable interest. Nor does a current family law proceeding, as the Family Law Act 1975 adjusts property interests, rather than creating interests in property.
There are many different grounds for lodging a caveat in Victoria. The one most commonly used in family law matters is an interest on the grounds of ‘an implied, resulting or constructive trust.’
Examples of a caveat being lodged for this reason may arise in the following circumstances:
- Contributing to the purchase of the property
This could be where the Caveator contributed to the purchase price of the property directly, but the contribution is not accurately reflected on the title to the property.
For example, one party pays the deposit or makes repayments on the mortgage, but the other party is listed as the sole registered owner on title.
- Contributing to the conservation, maintenance, or improvement of the property
This is where the Caveator has made contributions (both financial and non-financial) to the conservation, maintenance, or improvement of the property.
This can include things like making mortgage repayments, completing DIY renovations and/or paying for improvements to the property.
In Walter v Registrar of Titles [2003] VSCA 122 at [18] the court confirmed that mere work and labour done is not caveatable. Accordingly in Yamine v Mazloum [2017] VSC 601 Dixon J. rejected an argument that the caveator’s entitlement to be paid for his work on a quantum meruit basis was enforceable in equity by a constructive trust, as he found that the registered proprietor did not accept any intention to charge or secure the land with the obligation to repay the cost of the work or to create any beneficial interest in it.
- Other contributions not made directly to the property
A Caveator may still have an interest in the property even where their contributions throughout the relationship were not made directly in relation to the property.
This includes where contributions have been made to the welfare of the family or to the benefit of the owner; for example, the Caveator was the primary caregiver of the children in the relationship, which allowed the owner of the property to work and earn an income with which to buy the property.
In order to fulfil this ground of claim, the contributions made by the Caveator must be of such significance that it would be unfair to deny the Caveator an interest in the property.
- Making a promise or representation as to intention
This is where the registered owner of the property led the Caveator to believe that they would, at some point, have a legal interest in that property (meaning they would be on title), but that promise has not been fulfilled.
Risks of lodging a Caveat in your Family Law Matter
The circumstances where a caveat may be able to be lodged are varied and can be complex. It is best to discuss your specific situation with a lawyer who can consider your circumstances and properly advise you whether you have a caveatable interest in a particular property and if a caveat is appropriate.
There can be penalties associated with lodging a caveat when you do not have a caveatable interest and did not have an honest belief based on reasonable grounds that you had a caveatable interest.
If you proceed to lodge a caveat on a title without a legitimate caveatable interest and the owner of the property suffers a financial loss, you may be liable to pay compensation. Your lawyer may also be liable for costs incurred by the other party where a caveat is found to have been improperly lodged.
Reasons to Lodge a Caveat in Family Law Matters?
Determining the “asset pool” for division after separation is the first step in formalising a property settlement in family law.
Lodging a caveat on a property ensures that the caveated property cannot be disposed of while you are in the process of negotiating a settlement and getting property valuations. Caveats can ensure that your interests are properly protected while going through the negotiation process or Court process with your ex-spouse. A caveat may be even more important where there are concerns that your former spouse may sell the matrimonial home and send funds off shore from where they may be difficult to recover.
However, it is important to note that a caveat cannot stop the registered owner from drawing down on an existing mortgage or loan that is secured against the property. This will be an issue for negotiation in the family law matter.
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.
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 without the input or consent of the other party can be sought from the Federal Circuit and Family 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.
Chiara Nicolaci – Solicitor– Matthies Lawyers
Thus should you have any queries in regard to family law and property law matters, please contact Matthies Lawyers for an obligation-free consultation or call +61 3 8692 2517 today.
Disclaimer: This article contains general information only and is not intended to be a substitute for obtaining legal advice.