When looking to purchase a house, it is essential that you lodge a caveatable interest on the property. This Legal Kitz article will inform you of all you need to know about caveatable interests.
What is a caveat?
A caveat is a legal document which can prevent the registration of any property dealings which may defeat prior interests in that land. It is essentially a “red flag” translating to the phrase “beware” and it warns potential purchasers that there are other interests in that property to be considered. Because a caveat can cause substantial interruptions to property dealings, you must ensure you have a caveatable interest in that land to be able to lodge a caveat. It is important to determine if you have sufficient interest because lodging a caveat without doing so will cause you to be penalised.
Can a caveatable interest always be lodged?
A caveat cannot be lodged for every property-related dispute or wrongdoing that can occur between mortgagers, owners, buyers, builders and other related parties. A caveatable interest has to be an actual interest in the land. This is distinct from an insufficient personal or contractual right which may arise for actions in relation to the property. It can be a legal or equitable estate in the land. This includes an easement, charge, right, title, claim, demand, lien and encumbrance. These interests can extend beyond law and into a claim in equity. An equitable interest sufficient to support a caveat does not have to be one capable of being registered and there is no requirement for this interest to be supported by any registered instruments. A caveatable interest could also be a right, power or privilege clearly regarding the land. If your interest in land can be protected by specific performance, injunction or relief, it is most likely a caveatable interest. The determination of what is a caveatable interest has been considered numerous times with the following being held sufficient:
- Purchasers under a contract for sale;
- Legal agreements whereby security arises to charge a legal and equitable interest in real property;
- Mortgagee’s interest in the land;
- The security interest of a creditor who is given charge over the land; and
- A purchaser’s lien.
What is the registrar?
The registrar is the land register that governs the Torrens system and provides search facilities for NSW, QLD, VIC, SA and NT land title registries. The Registrar records all things to do with property, including ownership changes, mortgages and transactions.
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 it 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 one, there are very serious consequences. These consequences include it 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 it 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 it if the dispute is being resolved.
On the other hand, a caveatee may also apply for an order by the Supreme Court to remove it from the Register. This can be an alternative to waiting for the it to lapse and can be done by the registered owner, mortgagee, lessee 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 it should lapse and whether the property dispute can be resolved by other means, like compensation. Once it has lapsed, parties cannot lodge another one on the same or similar grounds.
What occurs if I incorrectly lodge a caveat?
If you incorrectly lodge a caveat you should seek legal advice immediately. If you fail to seek legal advice, a court may order you to compensate any person who suffers a financial loss as a result of your lodgement. Similarly, there are very serious consequences for lodging a caveat without having a caveatable interest. The caveat will be removed from the Registrar and you may be ordered by the court to pay costs in relation to the caveat.
How can a caveat be removed?
Caveats on property can be removed in a number of ways, including:
- Withdrawal by the caveator
- Court can order removal of the caveat
- Cancellation by the registrar
- The caveat can lapse, and will lapse 3 months after the lodgement of the caveat (if steps are not taken to secure the caveat)
Prior to the caveat lapsing, the registered proprietor can issue a notice to commence court proceedings or bring an application to the Supreme Court of Queensland in extreme circumstances if they wish to remove the priority interest from their property. If taken to court, the caveator must demonstrate a genuine arguable case, that is that they have a genuine interest in the land. If this step is satisfied, the court will consider whether the balance of convenience supports the removal, based on different factors such as the strength of the caveator’s claim against the registered proprietor. The court will then generally make an order as to which party should pay legal costs.
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 is a non-caveatable interest?
This can be distinguished from examples of non-caveatable interests. These do not give rise to a right in the whole property but merely a personal right such as to recover debts or proportions of finances:
- A contractor’s possession of a building site;
- An interest arising from certain improvements made to the land;
- Rights to share profits from the resale of land;
- Shareholder interests in a company; or
- An interest of a partner in partnership land.
These lists are not exhaustive. Importantly, caveatable interests must be in existence at the time the caveat is lodged rather than a prospective interest. Further noting that a contract may also include a special condition to remove the right to lodge a caveat. Before lodging a caveat, please ensure these circumstances do not infringe on your ability to protect your property interests.
What are the two types of caveats?
There are two types of caveats, absolute and permissive. An absolute caveat does not allow any further dealings with the caveated property until the caveat is removed. A permissive caveat allows further dealings with the property upon permission of the caveator.
What is a caveat on a title?
A caveat on a title is another way of mentioning that caveats are registered on title, with the Registrar. This has the effect of preventing any other party from affecting the caveator’s priority interest.
What legislation applies to me?
Provided below is a list of relevant state legislations to consider when lodging a caveat:
Australian Capital Territory – Land Titles Act 1925 (ACT)
New South Wales – Real Property Act 1900 (NSW)
Northern Territory – Land Title Act 2000 (NT)
Queensland – Land Title Act 1994 (QLD)
South Australia – Real Property Act 1886 (SA)
Tasmania – Land Titles Act 1980 (TAS)
Victoria – Transfer of Land Act 1958 (VIC)
Western Australia – Transfer of Land Act 1893 (WA)
Legal advice
Property law is a confusing area of the law, and that is why Legal Kitz is here to help! We offer FREE 30-minute consultations to assist you with any queries or concerns regarding caveatable interests. Book here now for your free consult.