Caveatable Interest Explained: Steps to Protect Your Property

Caveatable Interest Explained

Wondering about caveatable interests? Discover how to protect your stake in property disputes by lodging a caveat in family law cases

Amidst the bustling whirlwind of everyday family life, discussions about property ownership often take a backseat for many couples who find contentment in their current circumstances.  It is not uncommon for one partner to hold the sole legal title to a property, whether for tax reasons, logistical ease, or due to historical circumstances. Nevertheless, when challenges arise within the relationship, this arrangement can unexpectedly leave the other partner vulnerable, especially if there is a risk that the legal owner may attempt to transfer the property to conceal assets.

 How can a person protect their genuine contributions to a property when they do not have legal ownership?

Enter the caveat – a strategic move often employed by lawyers at the start of family law proceedings.  A caveat is a simple document lodged against the title of real property signalling to both the Registrar of Land Titles and third parties that the property’s ownership is under dispute.  It acts as a safeguard, halting any transactions involving the property, including transfers and new mortgages. This temporary freeze offers crucial breathing space for negotiation during matrimonial and de facto property settlements.

While the process of lodging a caveat may seem straightforward, it comes with its own set of risks and should not be undertaken lightly. If a person lodges a caveat without reasonable cause, they may become liable to compensate any party who suffers loss as a result of the caveat’s registration. This could involve compensating a purchaser, a mortgagee, or even an ex-spouse. Therefore, it is crucial that anyone claiming an interest in a property is able to substantiate a legitimate claim in the property itself. This is often referred to as a “caveatable interest”. Typically, a caveatable interest in property consists of contributions, whether financial or non-financial, towards the property’s acquisition, maintenance, or improvement.

Living with a partner for a period of time at their property, or merely providing love, care, and support within a relationship falls short of establishing a right to claim an interest in their property.  Contributions considered as loans or gifts do not constitute a caveatable interest; rather, there must be a contribution made with the explicit intention of benefiting from the property, without any expectation of repayment in the future. The concept of a caveatable interest significantly differs and is entirely separate from assessing the property pool in family law matters.  A tangible contribution directly linked to the property is necessary to justify the lodging of a caveat.

So what exactly constitutes a caveatable interest?

In family law disputes, constructive trusts often come into play. These trusts materialise when there is substantiated evidence of a mutual understanding or agreement regarding property ownership, even in the absence of formal documentation. Consider the common intention of constructive trust, which focuses on shared intentions. If a spouse, although not formally listed on the property’s title, financially contributed to it with the expectation of joint ownership, equitable principles may intervene to honour the agreement because that individual relies on the common intention to their detriment.

In cases where couples fail to discuss ownership altogether, a scenario that is indeed not uncommon, determining property ownership can become more complex. In such situations, courts may instead lean towards assessing unconscionability or unconscientious behaviour rather than common intention. This approach examines whether the legal owner unfairly retains the benefits of the property, essentially gaining a financial advantage at the other party’s expense.

Establishing a constructive trust involves numerous factors, and a combination of some of the following indicators may suggest the existence of a constructive trust:

• discussions or mutual understandings were indicating that both parties were acquiring the property as a joint endeavour;
• both parties actively participated in selecting the property;
• statements made such as “it’s for you and me” or “this is your house”;
• financial contributions to the deposit and/or purchase price;
• financial contributions towards ancillary expenses in the property’s acquisition, such as stamp duty, registration fees, and legal costs associated with conveyancing;
• financial contributions towards mortgage repayments, rates and/or house insurance;
• the pooling of incomes or jointly managed finances related to the property or makings of a family home; and/or
• whether a spouse made financial and non-financial contributions towards the property’s improvement and increased capital value.

While non-financial contributions, especially those involved in creating a family home, may lack easily measurable value, the courts do not overlook their significance. A recognition extends beyond the financial domain, understanding that while one partner may focus primarily on generating income, the other’s role in homemaking and parenting is equally important. Such acknowledgement ensures that property benefits are not automatically monopolised by the breadwinner.  Instead, it recognises the collaborative effort that enables one partner to pursue greater financial opportunities and subsequently greater property endeavours.

Constructive trusts play a pivotal role in determining equitable property rights, especially in cases where formal documentation tends to be lacking. Whether embedded in shared intentions or assessed through principles of unconscionability, the establishment of a constructive trust requires a thorough examination of various contributing factors. It is not a one-size-fits-all all.  Financial contributions are undeniably significant, yet non-financial contributions must not be undervalued.

Navigating property disputes during a separation can be an emotionally challenging experience. At Preston Law, we understand the anxieties that come with this transition, and we are committed to providing our clients with the support and guidance they need.  During our initial consultation, we will carefully assess your situation.  If you have a legitimate claim, or “caveatable interest”, in your ex-partner’s property, we can assist you in lodging a caveat and work towards helping you achieve a fair settlement.

If you are considering lodging a caveat on a property as part of your property settlement, speak to a family lawyer in Townsville today.