To Caveat Or Not To Caveat – That Is The New Question

What is a Caveat?

A caveat is an application that any person with a legal interest in a property can lodge with Land Use Victoria. In family law, caveats have therefore historically been used by a party to a separation who has an interest in a real property, but to which they are not on title. In this way, a caveat is used as a protective tool while parties are negotiating a family law property settlement. This is in an effort to prevent the registered owner of the property from dealing with it in a way that is contrary to the interests of the person who lodged the caveat: the caveator.

For example, a party to a separation may wish to lodge a caveat when the family home or other properties were purchased in only their former spouse’s name, or sometime in the name of a corporate entity.

Lodging a caveat on the title to a property seek to ensure that it cannot be sold while you are in the process of negotiating your family law property settlement with your former spouse, that your interests are protected, and that the property will remain part of the assets to be divided between the parties. Further, lodging a caveat puts the world-at-large on notice that there is a likely unresolved and unregistered interest in the land in favour of a third party.

Can I lodge a caveat?

The primary requirement to lodge a caveat is that the person must have a caveatable interest in the property. Unfortunately, the mere fact that you were in a marriage or de facto relationship with the person who is the registered owner on title does not create a caveatable interest. Nor does a caveatable interest arise simply by you issuing family law proceedings.

Most commonly, caveats in family law matters will be lodged on the basis of there being an implied trust. This can arise in situations where you can prove that you made contributions to the property, whether non-financial such as labour to make improvements to or maintain the property, or financially such as by contributing to the purchase price of or improvements to the property, or to mortgage repayments.

There is no one-size-fits-all answer as to whether an implied trust and therefore a caveatable interest arises, and each matter needs to be assessed based on the individual facts and merits. If your lawyer is satisfied that you have a caveatable interest in the property, they can then lodge an implied trust caveat on your behalf.

But what’s the catch?

Once you lodge a caveat, your former spouse can apply under different processes either to the Registrar of Titles, or to the Supreme Court of Victoria to have the caveat removed (discussed below). As a party, being taken to court by your former spouse in their pursuit of the removal of the caveat can be a costly and stressful event and may result in a costs order being made against you if you are unsuccessful in proving your caveatable interest. Not to mention it will likely lead to aggravation and delays to your family law settlement negotiations.

Family law practitioners can also face consequences for lodging a caveat that was found to lack a proper basis, hence why we always proceed with caution and assess the merits of each individual matter.  

What to do if a caveat is lodged against my property by my former spouse?

Caveats can be removed by agreement between the parties, usually in circumstances where negotiations are proceeding well. Or, a caveat should be removed following settlement being reached so that the agreement reached can be implemented.

However, if the parties are not in agreement, or there is an urgent reason for a caveat to be removed, such as an impending sale of the property, there are two primary courses of action:

1.Issuing a Lapsing Notice under s 89A of the Transfer of Land Act 1958 (Vic) (the Act):

This application is for a lapsing notice to be given to the party who issued the caveat. Once the notice is received, your former spouse will have 30 days to respond to the notice. Your former spouse may then decide to not respond to the notice and abandon their caveat, so that it will be removed by the Registrar of Titles after the 30 days have passed. However, they may choose to seek to maintain their caveat by issuing proceedings in a court or VCAT, in order to substantiate their claim. If your former spouse issues property settlement proceedings under the Family Law Act, then the mere existence of these proceedings is usually enough to substantiate their claim and prevent the caveat from lapsing under the notice.

Therefore, parties should be aware that by either lodging a caveat, or issuing a lapsing notice, you may be heading down a pathway which leads to the issuing of proceedings in your family law matter.  

2.Issuing proceedings under s 90(3) of the Act:

A more dramatic course of action, or sometimes required where there is urgency in the caveat being removed, is to issue an application in the Supreme Court of Victoria. Case law has established a two-step approach whereby your former spouse who lodged the caveat will have the onus of proving that there is ‘a serious question to be tried’ regarding their own asserted interest in the property, and that on the balance of convenience, this justifies the caveat being lodged and maintained.

As discussed above, pursuing the removal of a caveat in the Supreme Court can be costly and with no guarantee as to the outcome. Moreover, the ‘loser’ of the case may have to pay the legal costs of the ‘winner’, which can lead to greater agitation of the family law negotiations or proceedings which still must be settled independently of any Supreme Court proceedings.

Therefore, while caveats are considered to be an accessible and inexpensive means of protecting an interest in a property to which you are not on title, they are not always smooth sailing guaranteed and could see your family law settlement further complicated.

If you have separated from your spouse and the issue of caveats has arisen, contact our family law team to assist you in proceeding appropriately.

Tara Paatsch
Principal Lawyer
M 0412 660 842 | T 03 5225 5254
E tpaatsch@ha.legal

Natasha Vassallo
Lawyer
T 03 5225 5237
E nvassallo@ha.legal