Dominique Grubisa in the news for all the wrong reasons recently, but reminded me of an asset protection strategy of hers, and I wanted to see from the wise minds here if it would work. Against your property, grant an equitable or unregistered mortgage to your trust. The trust then registers a caveat on the title. Idea being that this prevents prevents anyone else registering or claiming a higher ranking interest in the equity. The bank has a registered mortgage, but after this, your trust with its caveat sucks up all the remaining equity, blocking anyone who comes along afterward to register a claim. The first mortgage lender will not be made aware of this. There is no need to register the second mortgage. Legit?
depends on how you define 'legit'. A trust is not a legal entity so cannot lodge a caveat. A trustee can though. But a caveat is not really a form of security, it is just notice to the world that someone other than the legal owners has some sort of equitable interest in the property. a caveat cannot suck anything. It is not notice of the mortgage if it is unregistered. The mortgage 'secures' the debt. So it will depend how much is owing. Without registration of a mortgage priority could also be lost. You can't just mortgage equity in a property it would need to be an amount. There will be many cases in years to come with people finding these things out.
Thanks Terry. To your points; * I thought an equitable mortgage is 'the promise by the borrower to reserve the relevant equity in the property for the lender'. So doesn't need an actual amount? Equitable mortgage - Sewell & Kettle * Caveat notes 'equitable mortgage' - just having this caveat means it it would get precedence over subsequent interests?
Hi Peter I think you are confusing 2 different definitions of 'equity'. Equity is a branch of law which deals with non-legal aspects Equity (law) - Wikipedia But equity also means the difference between the value of a property and the amount of its debts. Here an equitable mortgage refers to an unregistered mortgage. A registered mortgage is a legal mortgage, an unregistered one is an equitable mortgage - which would be enforced in a court of equity instead of a court of law, traditionally (today the courts have been combined) The laws of priorites are complex. Generally legal registrations take priority over equitable. And first in time takes priority over later in time. but an equitable mortgage can take priority over a legal mortgage if the legal mortgagor had notice of the equitable mortgage. but where a caveat gives notice of a fraudulent mortgage or a mortgage pretending to secure a debt it won't hold up if challenged.
No actual loan ... the mortgage secures nothing. Claiming there to be a loan when there is not would be fraud. More to come on all of this.
The whole issue is to delay, slow etc a claim and it seems to apply more distress to the owner to "cut a deal" using duress perhaps. That seems the nature of the approach - To find and disadvantage certain owners. A three card marley rather than "security"? I would be very wary of accepting and I believe from media that some of the supporting legal advice was given by related parties (Father and Mother !) both struck off as solicitors. Now a Chris Jackson is alleged to be her Father using an alias (the one struck off). https://www.smh.com.au/national/pro...ourt-to-pinpoint-targets-20201127-p56iig.html If considering such schemes I would recommend Brisbane solicitor Chris Baker give advice. He seems to know the claims and issues quite well and would provide sound independent advice before acting on seminar and other guidance. Our Lawyers - Hickey Lawyers
Thanks all. Read it in a book and sounded appealing - asset protection without having to transfer assets to a trust/other entity and pay stamp duty. Just register a caveat. Doesn't detail anything RE the loan. Imagine it's still possible to do but A) it's more complicated to do properly and B) less effective.
Legal Tip 115: The Gift and Borrow Back Strategy, Part 1 https://propertychat.com.au/community/threads/legal-tip-115-the-gift-and-borrow-back-strategy-part-1.7544/
That was a great thread Terry thanks for posting the link. What I took away from that as applicable to this case is: * Say my equity in property is $300k. * Gift $300k cash to trust. * Borrow it back at 0%, with trust having equitable mortgage over property. * Caveat title indicating trust equitable mortgage. Catch is one needs the $300k (or ability to borrow it) in the first place. Creative ways of doing this (like lending salary) but in any case real cash must be transferred and this is probably the limiting factor for most mortals. But the points above sound like the strongest way to do this? No interest or tax business, properly documented loan.
What if you did this instead - gift transfer $100k. Borrow it back. Gift transfer $100k again. Borrow it back. Do it again - $300k gifted.
Apart from the courts "looking through" such a totally artificial scheme the banks will hit you with such a pile of qcs that your head will spin. The banks will not allow such schemes to work and will strike hard and fast to prevent these schemes flourishing.
Asset protection. Trust's mortgage must be recovered from sale of property prior to any litigant's claim being paid.
