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A Will clause conferring a right to occupy the Deceased’s property upon a beneficiary was held to amount to a life estate.


BACKGROUND:


The Deceased’s Will contained a clause granting a “continued right of occupancy” of his residential property to his wife (“the Plaintiff”).


On 10 June 2014, the Plaintiff lodged a caveat on the property claiming an equitable interest. By Contract dated 30 June 2014, the Defendant, in his capacity as Executor, agreed to sell the property to two members of the Deceased’s extended family. Following exchange of Contracts, the Defendant served a notice under Section 74J of the Real Property Act 1900, designed to cause the Plaintiff’s caveat to lapse. The Plaintiff then filed a Notice of Motion seeking an order that the operation of the caveat be extended.


LIFE ESTATE:


The Plaintiff contended that the right of occupancy conferred by the Will amounted to a proprietary right in the nature of a ‘life estate’, and that such a right allowed her to occupy the property herself, or rent the property to tenants and retain the proceeds. This principle is long established by the decision in Re Keenan; Ford v Keenan (1914) 30 WN (NSW) 214.


The Defendant argued that the Will only provided the Plaintiff with a personal right to live in the property, without any proprietary entitlement. 


INTENTION OF THE TESTATOR:


His Honour stated that the task of the Court is not merely, or ultimately, to apply rules of construction, but to ascertain the intention of the Testator.


The Will, as it was drafted, contemplated that the Plaintiff would be left with security of accommodation. In addition to the right of occupancy, the Deceased left to the Plaintiff any furniture and contents within the home, a capital sum of $300,000.00 and an income stream of $300.00 per week until such time as she vacates the property.


It was apparent that the Will evinced “an intention on the part of the Deceased that the Plaintiff be secure in her right to accommodation … That intention bespeaks a proprietary right, and is inconsistent with a mere personal right amounting to no more than a mere licence.


His Honour held that use of the word “occupation” through the line of authority established by Re Keenan confirmed this intention. His Honour determined that: “The Deceased’s gift of a ‘continued right of occupancy’ in their matrimonial home is not a mere personal right, but is a right proprietary in nature”.  


His Honour stated: “It is not necessary to consider whether it has all the incidents of a life estate. It is sufficient to notice that an occupant of a property may occupy the property personally or by a tenant, with a right to receive rents and profits in tenancy. It is a right and nature of a life estate. It is a right capable of being maintained against successors in title of the Deceased. It is a right capable of sustaining caveat”.


DECISION:


His Honour found in favour of the Plaintiff, confirming that the intention of the Deceased was to provide his wife with a life interest in their residential property, and the proprietary rights associated with such an interest.


The Court made an order for the Plaintiff that the caveat would be extended until such time as a separate family provision claim under the Succession Act 2006 concerning the estate was finalised.


This case demonstrates the importance of employing the word “occupy” in the wording of a life estate clause in a Will, to ensure that the beneficiary of the life estate has the freedom to treat that property as his or her own, within reason, for the duration of their residence in it. This includes the right to rent the property and retain the proceeds.   


A full copy of the decision is available here.


For any questions in relation to this topic or any other Estate Planning matter, please call us on 1300 727 813, or email us.



Related articles:


- Your Will:  Can It Be Disputed?

- Is It Time To Update Your Will? 


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