After a separation, you may want to protect any interest you have in your ex-partner’s property. A caveat is a way that you can record your interest in that property on the certificate of title.
What is the Certificate of Title?
The certificate of title is the document that records important information about the property such as the ownership of the property and any encumbrances on the property such as mortgages by a bank. By recording your interest, you can prevent any further dealings with the property until the unregistered interest is dealt with.
At what stage in your relationship is lodging a caveat most helpful for you?
From our experience, we commonly assist our clients with lodging caveats when the parties have been in a de facto relationship or married, and one party has an interest in the property, yet the property is owned in the other party's name.
Explaining caveats in a scenario:
Bill and Sally have been in a de facto relationship for 8 years. Bill owned a home at the commencement of the relationship. Eventually Sally moved into Bill’s home and sold her own home. She used her money to pay down Bills’ mortgage. Bill’s home always stayed in his name only. They then separate.
This means that when they separate Bill can deal with the property in any way, he likes such as:
- Selling the property (even for example to a friend or acquaintance at less than it is worth); or
- Borrowing against the property, referred to as "encumbering" the property (such as borrowing money secured against the property and thereby reducing the equity in it)
In each of the above examples Bill will get access to money from the property which he could then hide or spend. It allows him to prevent Sally from getting access to her entitlements to that property.
If a caveat is registered on the property, Bill will not be able to follow through with any sale as the transfer of the property cannot be processed while the caveat is on the title. Bill would be forced to negotiate with Sally for her to withdraw the caveat to allow any sale to go through.
How Caveats help protect your interests
You can, and should lodge a caveat on the property for two main reasons:
- To prevent the sale of the property without your knowledge
- To prevent your ex-partner using the property to borrow money from the bank
For example, If Bill wants to borrow money against his property, the lender will check the certificate of title of the property when determining whether to lend him the money. They won’t be able to register a mortgage on the property if there is a caveat on the property and so they won’t lend Bill the money.
In this case, without a caveat, Sally would not be mentioned at all on the certificate of title for the property as it is registered solely in the name of Bill. The lender would have no idea that Sally has an interest in the property. The lender would lend Bill the money and register a mortgage on the title of the property to protect their interests. They are therefore likely to be paid out in preference to Sally if the property was ever sold. This means Sally could be prevented from obtaining her entitlements to the property or any proceeds from the sale of the property.
What are the Risks of Lodging Caveats?
When a party lodges a caveat improperly or without cause, they may be responsible for paying compensation and damages to the person who suffers a loss as a result. For example, lodging a caveat to try to delay or prevent someone from selling their property.