CAVEATS AND SAFELY PROTECTING REAL PROPERTY INTERESTS

Caveats are often used in family law as a protective tool to preserve an interest in real property. Caveats are an affordable, effective means by which parties can prevent the registered title holder from engaging in dealings without consent or authorisation of the caveator. This is a particularly useful tool when land is registered in the name of one party only. However, caveators and legal practitioners should be aware of the potential dangers of lodging caveats.

More often than not, it is legal practitioners who lodge caveats on their client’s behalf. Caveators and their legal representatives should carefully consider the grounds on which a caveatable interest is asserted, not only in accordance with the client’s instructions, but in light of any supporting documentation and evidence the client may be able to produce so as to ensure that the caveat has a proper factual and legal basis.

Lawyers who facilitate the lodgement of a caveat on their client’s behalf without proper basis should be mindful that costs can be awarded against them for knowingly doing so.
There are ways to protect your property rights without incurring risk. Case law tells us that a family law claim in and of itself should not be treated as a caveatable interest and the consequences of treating it as such may expose a legal practitioner to a realm of personal costs orders and disciplinary action.

However, the personal consequences of lodging inappropriate caveats can be avoided as long as the solicitor makes a genuine effort to ensure that the caveat is lodged with a proper basis, even if the Court ultimately infers that no such interest exists.

Establishing a proper basis
In family law, caveats are commonly lodged on behalf of a spouse who is not a registered proprietor on the title. The basis of the claim is commonly an equitable trust being an implied, resulting or constructive trust. Without the need to specify which of these equitable trusts is claimed, it is essential that the caveator is able to identify at least one ground that is arguable on the facts of the case so as to make a bona fide effort to lodge the caveat with a proper basis. An experienced family lawyer can provide guidance.

Drafting a caveat
At the time the caveat is lodged with Land Use Victoria, the following must be provided:
1. A statement of claim which particularises the grounds of the claim;
2. Details of the asserted estate or interest; and
3. The prohibition sought.

It should be noted that the nature of the prohibition sought should be proportionate to the nature of the caveator’s claim. Adopting an excessive prohibition may expose the caveator, and in some cases, their legal representative to adverse consequences and may result in the caveat being unsustainable.

Lifting an improper caveat
In circumstances where a caveator does not consent to the lifting of a caveat, an application under section 89A of the Transfer of Land Act 1958 (Vic) (“Transfer of Land Act”) or issuing proceedings under section 90(3) of the Transfer of Land Act are two potential pathways.

A person who makes an application under section 89A must include a certificate of a legal practitioner which states that the caveator does not actually have the interest that they claim to have.

The Registrar must thereafter provide notice to the caveator of their contested claim, after which, the caveator will have a minimum of 30 days to withdraw the caveat, issue proceedings or substantiate their claim.

However, an application under section 89A may not be the most appropriate path to take in instances where family law proceedings are already on foot. In circumstances where a property which is subject to a caveat has been sold to an arm’s length purchaser and settlement is due to take place shortly, a section 90(3) application may be more appropriate. Pursuant to section 90(3) of the Transfer of Land Act, this application may be brought by “any person who is adversely affected by any such caveat”.
A caveator may nevertheless be compelled to lift the caveat in instances where their interest can be sufficiently preserved by having the proceeds from the sale of the real property placed in a lawyer’s trust account prior to property settlement arrangements being worked out.

Recently, the team at Vic Rajah Family Lawyers was required to file an urgent application in the Federal Circuit Court where their client’s estranged spouse refused to withdraw a caveat and to vacate a real property after it had been sold to an arm’s length purchaser with settlement rapidly approaching.

The Judge in that case ordered the spouse to remove the caveat and directed the Registrar of Titles to action this if the spouse failed to do so within a set timeframe. The spouse was also ordered to leave the property prior to settlement taking place.

Alternatives to caveats
Whilst an application under section 79 (for matrimonial claims) or section 90SM (for de facto relationship claims) of the Family Law Act (Cth) confers a legislative means to make a claim for an adjustment of property interests, it does not give rise to a caveatable interest in real property. If a client wishes to prevent dealings on a real property in which their interest is unclear, an alternative approach should be adopted. By way of example, a party may seek an interim injunction in the Family Court restraining a party from engaging in any dealings relating to the real property pending a further Order of the Court or unless the written consent of the other party is obtained. Injunctions are typically more costly and may take longer to obtain, however, in cases where a caveat is not appropriate, an injunction may be a suitable alternative.

The team at Vic Rajah Family Lawyers are highly-experienced in assisting with complex property matters and the lodgement of caveats and dealing with their removal.

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