Caveats are one of the most recognisable forms of land dealings across the Australian States and Territories. However, they are also widely misunderstood.
Most commonly, caveats are used to help secure debts owed by the registered proprietor of a parcel of land to the ‘caveator’ (person lodging the caveat). However, before using a caveat for this or any other purpose, it is important that you fully understand your legal rights and obligations; and the risks associated with lodging them.
What is a caveat?
A caveat is a legal instrument that can be lodged on the title of a parcel of real estate property. It alerts the public to any interests someone may have in that property. The function of a caveat is to block certain other dealings from being registered. This can prevent other parties from registering conflicting interests over the property; or could block the owner from selling or otherwise profiting from the property until they have repaid a debt.
What gives a person the right to lodge a caveat?
Anyone who has a caveatable interest in a certain block of land is eligible to lodge a caveat. Caveatable interests come about when someone has a legal or equitable interest in the property in question, giving rise to an enforceable right. Examples of caveatable interests include:
a) a registered or equitable mortgage, including ‘unregistered’ loans which are agreed to be secured in whole or part over the property in question (without a mortgage being formally placed on title);
b) someone who contributes financially to a purchase of property, but chooses not to appear on title for tax or asset protection reasons (usually a spouse);
c) a purchaser under a contract for sale (i.e., before settlement has been effected);
d) in some instances, a tenant.
A caveat will stay in place and continue to block certain proceedings until the caveator withdraws it, it lapses, it is removed by a court order, or the caveator consents to a certain registration over the title by another party.
What risks are associated with lodging a caveat?
While caveats are an effective means by which to protect certain legal interests, caution should be exercised when seeking to lodge them. Each State and Territory in Australia has their own system for the lodgement of caveats. Depending on where the property in question is, the lodgement process may vary. This is important, as if there are any inaccuracies in the lodgement application, it may be rejected, leading to additional fees being payable in some instances.
Additionally, it is vital that a person seeking to lodge a caveat has a valid legal or equitable interest in the property that is ‘caveatable’. If a registered caveat delays or prevents someone else from taking certain actions in regard to a property, the other party may experience financial loss. If the person who lodged the caveat cannot then prove that they had the valid caveatable interest which was claimed, they will be liable to compensate such losses. This could include liability for expensive additional fees and charges for the associated court proceedings.
Caveats are effective legal tools for protecting your property interests. However, they should be used with caution, and only after seeking proper legal advice.