Caveat to Protect Real Property
Should a caveat be lodged over property after parties separate?
All land (“real property”) in Victoria is recorded in a register managed by the Department of Environment, Land, Water and Planning (“Land Titles”). Any dealing with real property such as a sale, lease or mortgage must be registered with Land Titles. Real property includes residential homes, farms, apartments and vacant land. Real property can be owned by:
- An individual;
- 2 or more individuals together;
- A company or a trust.
Not all real property owned by parties to a relationship or a marriage are in joint names. The real property may have been owned by one party before the commencement of the relationship or a decision may have been made by the parties to register the real property in one party’s name only. For example it may have been for taxation reasons. If real property is owned by one party when the parties separate then this may be problematic as the party that owns the property can deal with it without the other party knowing. For example the real property could be sold or leased or borrowed against before the parties have the chance to resolve property settlement matters.
Property Law enables a person who has an interest in real property to lodge a caveat against the title. A caveat essentially prevents any dealing with real property from happening by notifying the party that lodged the caveat about an intended dealing with the property. It is common that a separated party would lodge a caveat against the real property of the other party. Whilst the practice in family law is common, greater care should be taken by a party and his/her lawyer to properly assess if the he/she has an interest in the real property to justify the caveat being lodged. An incorrectly lodged caveat can result in serious consequences for the party that lodged the caveat including a costs order against them for the costs incurred by the real property owner having the caveat removed. The fact that a party’s former relationship partner or spouse is the owner of the real property is not sufficient for a caveat to be lodged.
Instead of lodging a caveat, a separated party should consider if he/she should obtain a Court order preventing the real property from being dealt with and for a caveat to be lodged. If the Court orders that a caveat can be lodged against the real property then there is no concern that the caveat has been incorrectly lodged. In deciding if a Court order should be obtained, matters including the following should be considered:
- The value of the real property;
- If the real property is owned by the other party jointly with another person such as his/her mother or father;
- The total value of the other assets available for division;
- The legal costs associated with obtaining an order;
- If the other party refuses to agree to not sell or deal with the real property before finalisation of property settlement.
A party should not automatically lodge a caveat over real property owned by their former partner or spouse in Victoria without carefully considering if the caveat can be lodged.
The experienced family law team at Armstrong Legal Melbourne can provide advice about the need to lodge and the risks associated with lodging a caveat.
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