By Cassandra Selvaggio – Principal Lawyer
Caveats are a useful tool to protect real property until a dispute about ownership has been determined. However, they can only be used when there is a proper legal basis.
In family law, we often see couples who have purchased property together during their relationship but registered the property in only one person’s name. This can cause issues about ownership and rights to the property upon separation.
In the case of Piroshenko v Grojsman [2010] VSC 240, the Chief Justice of the Victorian Supreme Court said, “Caveats are not bargaining chips”.
You cannot register a caveat on another person’s property as leverage in family law negotiations. Being in a relationship or marriage with the person on title is not enough to establish a caveatable interest in property.
So, what does a caveat do, and when can you lodge one?
What is a caveat?
A caveat is a legal restraint, formally known as a ‘statutory injunction’ to maintain the status of a property until the person’s interest in the property has been determined. That may be determined by agreement between interested parties, or by a Court.
A caveat is registered on the title of the property and will show up on a title search.
What is the purpose of a caveat?
The purpose of a caveat is two-fold.
- It acts as notice that the person who registered the caveat (caveator) claims to have an interest in the property, even though they are not registered on the title.
- If anyone tries to register a dealing affecting the title, Land Victoria notifies the caveator of the proposed dealing. That gives the caveator an opportunity to take action. Proposed dealings include if the person on title attempts to transfer the property to someone else, or a lender tries to register a new mortgage against the property.
There is a common misconception that lodging a caveat prevents the legal owner from dealing with the property in any way. That is not the case. However, a caveat does make it difficult for them. Banks, creditors and third parties are less likely to accept the property as security, or to purchase the property, until the caveat has been removed from the title.
When can I lodge a caveat?
In Piroshenko v Grojsman, the Court stated that as the caveator, you must establish that:
- There is a serious question to be tried that you have an interest in the land.
- You will suffer irreparable injury for which damages will not be adequate compensation unless an injunction is granted.
- The balance of convenience favours the maintenance of the caveat until trial, where the Court will make a determination.
To lodge a caveat, you need to have an existing “caveatable interest” in the property. When separating, you may have a right to apply to the Court for a property settlement based on Family Law Act principles. That is different from having an existing interest in property that is registered in another person’s name.
There have been cases where lawyers have incurred significant costs for their client by lodging caveats without a proper legal basis.
Caveats are a complex area of law. It is important to get legal advice before lodging a caveat on another person’s property.
If you have recently separated or are thinking about separation, you may be concerned about protecting your interest in property. Call us on 03 8672 5222 to make an appointment with one of our experienced family lawyers.
