Ownership of property, it’s not what you think!

Ownership of property, it’s not what you think!

When it comes to ownership of property it is commonplace for couples to buy or hold real estate in the name of one partner only, either for asset protection purposes, or to keep their financial interests separate, or because the property may have been brought into a relationship by one partner and remained in their sole name.

Family Law complicates these arrangements when a couple separates, and legal interests fail to reflect the other partner’s myriad of contributions to that property, and the relationship in general. Accredited Specialist Family Lawyer Simone Green discusses the often-misunderstood overlap between legal and equitable interests in property in family law.

In simple terms as it relates to ownership of property, the legal owner of a property, is the person/s or entity listed on the registered title to that property, whereas equitable interests refer to rights, other than strict legal ownership, arising from trusts or constructive trusts (where one party has made a significant contribution to the purchase or improvement of property but is not on title). It is possible for equitable interests to be implied by the conduct of the parties through the common intention to share in the expenses of the purchase and maintenance of a property and by the detrimental reliance on that intention via direct financial contributions. Usually, equitable interests may be asserted by way of an Application in the Supreme Court of the relevant State’s Equity division.

When a couple have separated however, property interests may be altered by way of an Application to the Federal Circuit and Family Court of Australia (‘FCFCOA’). The FCFCOA, is a federal court, operating under Federal legislation, the Family Law Act 1975 and can also deal with property interests of de facto couples under powers transferred from the states and territories. This makes the FCFCOA a super jurisdiction with broader equitable powers available to it for separated couples.

Ownership Of Property Misconception

One common misconception around ownership of property we see at Streeterlaw is a former spouse can easily lodge a caveat on the title of real property  to prevent that property being transferred, sold, mortgaged or otherwise dealt with and without that caveat first being removed. While State and Territory laws may differ within Australia, in New South Wales for example, a former spouse does not have a ‘caveat-able interest’ in real property based on equitable rights, at least not until a Court order is made. This often leads to improperly filed caveats being lodged on the title to property which risk a lapsing notice being issued.

A recent family law case, Pethrick & Folmar [2022] FedCFamC1F 905 (17 November 2022) dealt with the issue of improperly registered caveats by a de facto wife, in Victoria. The de facto wife in the case, claimed to have a caveat-able interest in properties registered to the de facto husband on the basis of ‘a constructive, resulting and/or implied trust’ and claimed such in order to lodge caveats on the properties, but failed to seek such declarations in an Application filed in the FCFCOA.

The de facto husband in the Penthrick & Folmar case sought the removal of the caveats to enable the sale of a property and sought Court orders requiring such. The Court ultimately ordered that the de facto wife remove her caveats on the properties owned by the de facto husband to enable the sale; but injuncted the proceeds of sale for a short period to allow the de facto wife to make a proper Application regarding the distribution of those funds.

Judge Strum said at paragraph [26] of the Penthrick & Folmar judgment;

“ It is trite that contributions do not, in and of themselves, give rise, without more, to an interest in property. If that were so, ss 79 and 90SM of the Act might well be otiose. Further, an order under those sections ‘altering the interests’ of the parties to the marriage or the de facto relationship in their property or that of either of them does just that. It is well settled that those sections do not give a party any legal or equitable rights to, or interest in, property before an order is made under subsection (1) of either of those sections. In Fisher v Fisher [1986] HCA 61 … Mason and Deane JJ said that ‘orders made under s 79 do not give effect to antecedent rights arising in virtue of the marital relationship. Instead they perform a dual function by creating and enforcing rights in one blow, so to speak …’. This is so, no matter how likely it is that the Court will make an order under subsection (1) of either of those sections, as the power to do so is wholly discretionary.”

So, what does this mean for couples in family law seeking to stop the sale of a property? In essence, it is necessary to file an Application for injunctive relief in the FCFCOA seeking an order before filing the caveat to avoid a lapsing notice being issued by the registered proprietor of the land and being  liable for potential costs.

If you are concerned about the premature sale of assets of your relationship by your former partner, seek early advice from Family Law specialists. Our trusted team of Accredited Specialists are ready to help.

Call and speak to us today on 1300 293 957