What Is A Caveat On A Property?

What Is A Caveat On A Property?

What Is A Caveat On A Property

Find out how to lodge a caveat, why you may need one and the benefits and protection it can provide.

When you want to secure your interest in a property and prevent anyone else from dealing with it, you may want to consider lodging a caveat as an additional layer of protection. A commercial lawyer can help by doing all the necessary checks to make sure you have a caveatable interest. Let’s take a closer look.

What Is A Caveat?

The Real Property Act 1900 provides a statutory injunction that prevents plans or registrations on a title in NSW. It is a notification or warning to others that a person has an interest in the real property. Caveat means “beware”, and lodging a caveat on a prospective property warns anyone with a similar claim that someone else has priority. It effectively acts as a “freeze” on the property, prevents anyone else from dealing with that property, and protects the purchaser’s interests between the sale and settlement.

The person who lodged a caveat on a title is called the “caveator”.

Benefits Of Lodging A Caveat

  1. A caveat can offer you an additional layer of protection against fraud, as it prevents future lodgements on the title by other interested parties.
  2. As a property buyer with a long settlement, it offers increased protection, as it makes a record of their interest even before the title is transferred into their name.
  3. A caveat is more secure than a priority notice as it remains on the title until it is formally withdrawn or removed by a court order.
  4. It can provide extra time for parties to apply to court.

Uses Of Caveat

There are several ways to use a caveat:

  • If not already protected by a mortgage, it prevents any other registration of incoming interest by other prospective buyers on unencumbered land.
  • When a house or land is under a contract for sale, it can protect the purchaser.
  • It can register plans for demolition.
  • Lenders or banks may lodge a caveat to secure a loan and create awareness of their financial interest.

How To Lodge A Caveat?

Before lodging a caveat, seek legal advice from a lawyer who specialises in commercial law.

When you prepare the caveat document, a solicitor or conveyancer can help. It can be lodged electronically or downloaded and completed as a hard copy.

The form is then submitted either electronically or in person at the land registry service (LRS), and there is a fee that you will need to pay.

The LRS examines the documentation, as well as any other supporting information.

The register is only updated if the lodgement meets the requirements, and the caveat can then be lodged formally. Once it is processed, the caveat is recorded against the land title on their register.

The applicant, and the title’s registered proprietor, if they are not the caveator. receive a confirmation notice from LRS.

Ensure that you have a caveatable interest in the property before you take steps to lodge. Otherwise, if you have submitted a caveat without reasonable cause, you may be liable to pay compensation. 

What Details Need To Be In A Caveat?

The information that is required to lodge a caveat will differ from state to state. In NSW, for example, you need to include: 

  • Caveator’s name and address
  • Name and address of registered proprietor
  • Caveatable interest 
  • Grounds for the interest
  • Reference details
  • Verified Statutory Declaration
  • Signature of the caveator, lawyer or agent

What Is An Interest?

Interest could be an equitable mortgage, estate or a right concerning the land title. Only those with an eligible interest can submit a caveat.

What Are Grounds for Interest?

When you lodge your caveat, you need to show that you have the legal grounds to claim interest over the property, for example, a long settlement or an equitable mortgage due to a broken down relationship.

How To Remove A Caveat On A Property Title?

Before getting caveats removed, you should seek legal advice, as the process can vary from state to state. There are several ways to remove the caveat, depending on the circumstances.

  • Supreme Court order
  • The caveat lapses
  • Withdrawal
  • By consent of the caveator

Order Of The court

If a party objects to a caveat, they can try to resolve the matter with the caveator. Otherwise, they can attempt resolution through legal proceedings in the Supreme court. The court may rule to extend or remove the caveat.

Caveat Lapse

A registered proprietor of the title will serve a notice to the caveator to commence court proceedings to establish their interest. If the caveator does not initiate proceedings within 14 days and notify the registrar of titles, the caveat will lapse.

Withdrawal

Caveats can be withdrawn if ordered by the court or requested by the caveator. Some forms must be completed, signed and lodged with the LRS.

Consent

The caveator may consent to the registration of a plan or dealing without removing the caveat. For example, if a lease was granted on a property.

Standard Scenarios For Lodging A Caveat

Signing a contract to purchase property does not immediately make you the owner of the land. If you submit a caveat, it provides notification to the world that you have an interest, which can protect you if a dishonest vendor tries to resell the property to another person.

When a relationship has broken down, one party may want to preserve their interest in a property that may not be registered in their name but where they both have contributed financially.

Summary

What is a caveat? It is a notification or warning to others that a person has an interest in the land or property. Caveats are lodged as a statutory injunction that prevents any plans or registrations on a title until it is removed. As a property buyer with a long settlement, it offers increased protection, as it makes a record of their interest even before the title is transferred to them. It can be lodged through the land registry service, and the process and required documentation can vary from state to state.

You need to have a caveatable interest in the house or land before you take steps to lodge. Otherwise, if you lodge a caveat without reasonable cause, you may be liable to pay compensation. 

Before applying for a caveat seek legal advice from a lawyer who specialises in commercial law.

FAQs

1. What Is The Purpose Of A Caveat?

Answer: It is a notification or warning to others that a person has an interest in the title. Caveat means “beware”, and lodging a caveat on a prospective property warns anyone with a similar claim that someone else has priority. It effectively acts as a “freeze” on the property, prevents anyone else from dealing with that property, and protects the purchaser’s interests between the sale and settlement.

2. Can A Property Be Sold If It Has A Caveat?

Answer: If a caveat has been successfully lodged on a property, it can not be sold unless the caveat is removed or withdrawn by the caveator. Generally, lawyers will lodge caveats to protect their client’s interests.

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