What is a Caveat?

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Australia’s system of property interests is all about registration. When an interest in the property is registered, it is lawfully protected. The formal process of asserting and protecting interests on a property is under a caveat. Legal Kitz have provided the below outline to guide you through how caveats work.

When interest in the land is not registered and arises from a situation of equity, it may be vulnerable. To give you an example, a builder who renovates a home and is not paid has an unregistered interest in that property compared to a new buyer who is registering their purchase of the newly renovated home.

What are caveats and how do they work?

A caveat is a type of statutory injunction that, while it remains in force, is used to protect all interests in land. A caveat’s main function is to “freeze” the Register in the dealings of a property in question, preventing anyone else from registering that property, and effectively protecting the interests of the individual or organization that lodged the caveat (known as the caveator). The party affected is conversely known as the caveatee. 

If someone is engaging with dealings of property without acknowledgement of your interest in the property, a caveat will serve as formal notice of your unregistered interest in that land. 

Who can lodge a caveat?

Many different parties can lodge a caveat; including a purchaser under an installment contract, the registrar, the registered owner or a person with the benefit of a court order. However, these parties must have a caveatable interest in the land and must lodge the caveat in the correct form. This could be a legal or equitable interest in the land or a right power or privilege in relation to the particular land in question including registered or equitable mortgages, transfer, purchasers under and agreement for sale, tenants, registered proprietors or parties with contractual rights and interests. It is important that this interest is distinguished from merely a personal equitable interest rather than an interest in the land; even if it is supported by a contract, it will be insufficient.

If you do not have a caveatable interest and you lodge a caveat, there are very serious consequences. These consequences include your caveat being removed from the Register and anyone affected may be able to order payments for the costs you caused. Each state and territory has a system and forms for lodging caveats that must be adhered to.

How long is a caveat on the register?

The duration is dependent on the nature of the caveat and the steps taken by the parties. Generally, a caveat will automatically lapse after 3 months. Alternatively, this can occur after 14 days if the caveatee serves a notice on the caveator requesting proceedings to commence in a court, in order to establish the interest claimed under the caveat. 

If the caveator does not want the caveat to lapse because their interests have not been resolved, they may also commence action in the Supreme Court prior to these 3-month and 14-day deadlines. 

If a caveat is lodged by the registered owner,  with consent from the registered owner or under installment contracts, they may also be non-lapsing. Alternatively, the caveator may want to formally withdraw the caveat if the dispute is being resolved.

On the other hand, a caveatee may also apply for an order by the Supreme Court to remove a caveat from the Register. This can be an alternative to waiting for the caveat to lapse and can be done by the registered owner, mortgagee, leasee or any other person with an interest in the property. To be successful in removing a caveat, the affected party must disprove or question the caveator’s entitlement to lodge it initially, their caveatable interest, convenience, negative hardships imposed on the interested parties and overall validity. This is a balance of convenience and valid reasoning to determine whether a caveat should lapse and whether the property dispute can be resolved by other means, like compensation. Once it has lapsed, parties cannot lodge another caveat on the same or similar grounds.

What are some more examples of when a caveat can be used?

  • Signing a contract to purchase land where registering the transfer occurs at a later date. A purchaser should lodge a caveat to give notice that they have an interest in that property and to protect themselves against dishonest agents who could try to sell the property to a buyer offering more after an agreement with you.
  • A caveat can arise out of a charging clause. This occurs between a supplier and customer, where the supplier may charge property as security for a debt or allow them to take a mortgage on the property.

What are the key takeaways?

Lodging a caveat can create protection over an interest in property such as mortgages, debt recovery or purchases. Before it is lodged, it is important to determine whether you have a caveatable interest in the property. If these steps are not taken, your caveat will be removed and you can be ordered to pay additional compensation fees by causing hardship for other parties leaving you in a worse position than where you began.

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Still needing further clarification? Legal Kitz is here to help with any legal enquiries. Click here to book a FREE consultation with one of our highly experienced solicitors today or contact us at info@legalkitz.com.au or by calling 1300 988 954.

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