Can I put a caveat on the house?
As lawyers, we are often asked: can I put a caveat on the house? Alternatively, a frustrated home owner will contact us to say their former partner has lodged a caveat against their property without their knowledge.
This article explores the common bases upon which a person may lodge a caveat in the context of a family law matter.
Grounds for lodging a caveat
While there are 44 available grounds for lodging a caveat in Victoria, the majority of caveats in Family Law matters assert an interest in the relevant property on the basis of an “implied, resulting or constructive trust”. It is for this reason that asserted trust interests is the focus of this article.
Common reasons for a caveator (person lodging a caveat) to assert a trust interest include that they:
- made contributions to the purchase price of the property which are not reflected on the title to the property – either because the caveator is not listed as an owner or because their share in the property does not adequately reflect their financial contribution;
- transferred the property, or part of it, to their spouse or partner, for no consideration or for less than market value;
- made financial or non-financial contributions to the conservation, maintenance or improvement of the property;
- was promised or led to believe that they would have an interest in the property; or
- made financial or non-financial contributions to the welfare of the family or to the benefit of the registered owner of the property, such that it would be unfair to deny the caveator an interest in the property.
Constructive Trusts
The last three categories are examples of “constructive trust” claims. There are two types of constructive trust, which can give rise to a caveatable interest:
A common intention constructive trust arises where there is a clear intention by the registered owner of a property to impart a beneficial interest in their property on their spouse/partner. This can be proven by pointing to an express agreement or arrangement between the parties that they would each have a share in the property. It might also be evidenced by the non-owner contributing financially to the property pursuant to a mutual understanding that the non-owner would then acquire an interest in the property.
Arguably, Family Lawyers most often deal with clients who have a remedial constructive trust interest in their former partner’s property. These are sometimes referred to as “Baumgartner trusts” after the High Court case of Baumgartner v Baumgartner, which first established this type of trust.
To establish a remedial constructive trust in property, a Court must be satisfied that:
- there has been a joint relationship which has broken down;
- the owner of property has benefited from contributions made by the other party for the purposes of the joint relationship;
- it was not specifically intended that the property owner would retain those benefits without accounting to the other party; and
- it would be unconscionable for the property owner to deny that the other party has an equitable interest in the property.
A common scenario which may give rise to a Baumgartner trust is where a parent, has taken care of children and household duties while the father has undertaken paid employment and provided for the family financially. If the mother’s contributions have allowed the father to apply himself to acquiring wealth and properties during the relationship, which are registered solely in his name, the mother be able to assert that it would be unconscionable to deny her an interest in those properties upon a breakdown of their relationship.
We encourage you to seek legal advice if you feel you might have a constructive trust interest in property which is not registered in your name.
Two important things should be noted, however, about remedial constructive trusts:
- Courts have repeatedly held that the mere existence of a de facto relationship or marriage will not give rise to a remedial constructive trust, even where parties have pooled their resources and shared income or held joint accounts;
- These types of trusts are “remedial” and arise after a Court finds that it would be unconscionable not to grant a party an interest in land or property. Accordingly, before the Court’s intervention no constructive trust exists upon which a caveat may be claimed. This means that caveats lodged on this basis are open to challenge and may be set aside.
Contact our team of family lawyers today to find out if you are looking at a property settlement and are thinking about a caveat.