Summary
- A caveatable interest is a legal right or claim over land that entitles a person to lodge a caveat, preventing the registered owner from dealing with the property without notice.
- To be valid, the interest must arise from a recognised legal or equitable interest in the land itself, not merely a personal or contractual right.
- Lodging a caveat without a genuine caveatable interest can expose a business to liability for compensation under state legislation.
- This article is a plain-English guide to caveatable interests in Australian property law, written for business owners operating in Australia.
- It is produced by LegalVision, a commercial law firm that specialises in advising clients on property and commercial law matters
Tips for Businesses
Confirm you hold a genuine legal or equitable interest before lodging a caveat. Document the basis of your interest clearly. If your right arises only from a contract, seek legal advice on whether it qualifies. An unjustified caveat can result in compensation claims against your business.
On this page
- How Can I Determine Whether I Have a Caveatable Interest?
- What is the Process for Lodging a Caveat?
- What Should I Consider if I want to Include a Provision in my Agreement that Charges Someone’s Land?
- The Process for Removing a Caveat
- What if the Caveat Has Not Been Lodged Properly?
- Key Takeaways
- Frequently Asked Question
A caveatable interest is a legally recognised proprietary interest in land that entitles you to lodge a caveat on the title to protect that interest. It must be a genuine legal or equitable interest, such as a purchaser’s interest under a contract or an unregistered mortgage, and not merely a personal or contractual claim, as only valid interests can support a caveat and prevent dealings with the property without your consent. This article explains what a caveatable interest is, when it arises, and how to determine whether you can lodge a caveat.
How Can I Determine Whether I Have a Caveatable Interest?
A caveatable interest is different from a regular interest in the property. It includes:
- a purchaser’s interest under an agreement for sale;
- a vendor’s lien; and
- a purchaser’s lien.
Examples of non-caveatable interests are:
- possession of a building site by a contractor;
- the interest of a person who has made improvements to another person’s land; and
- rights arising from an agreement to share profits on the resale of land.
Only those who have an express interest in the property, such as a chargee or mortgagee, can claim a caveat. An express interest is where the parties reach an agreement for the caveat to go on the property.
Some people assume that a court judgment against another person creates a caveatable interest in that person’s real property. However, this is not the case. Once you have obtained a judgment against someone else, you may be able to negotiate and agree to create a caveatable interest in property. You can then lodge a caveat to protect your interest. In some cases, parties may reach an agreement to create a registered mortgage over the title of the debtor’s property. A caveat is advantageous as it prevents others from disposing of or altering your property without your knowledge.
What is the Process for Lodging a Caveat?
The process for lodging a caveat is straightforward. For example, in NSW, you must complete the form the Land and Property Information Office provides and fill in the following information:
- The details of the property that you claim to have an interest in. We recommend that you complete a title search to check this information.
- The details of the registered proprietor of the property. Again, this is best checked off against the title search.
- The caveator’s name and address, including the address where notices relating to the caveat may be served. This is necessary if lapsing notices or documents relating to the court proceedings must be served.
- The nature of the interest that you claim to have and how it came about, for example, is it a legal or an equitable interest.
- The signature of either the caveator or their agent. Your lawyer can also sign on your behalf.
What Should I Consider if I want to Include a Provision in my Agreement that Charges Someone’s Land?
As set out above, someone owing you money does not create an automatic caveatable interest. If you provide goods and services, and wish to create a caveatable interest and charge the purchaser/customer’s real estate, you should consider the following:
- The Agreement should contain an operative clause under which the purchaser/customer is obliged to grant and register a caveat over the property.
- Is there an agreed mechanism by which the caveat will be withdrawn? Your agreement should contemplate this. For example, if there is a loan agreement loan agreement
- There are different requirements for lodging caveats in each State, and your agreement should reflect this. In all states, the caveator can withdraw the caveats at any time. There are no formal requirements in NSW, the ACT, Tasmania and WA.
It is important to note that the caveat would not arise by specifying the Secured Property (i.e. by filling out the Folio Identifier and Street Address in the Agreement). You must lodge a caveat in a particular form and manner, satisfying any formal rules. Note that in Queensland and Tasmania, there are less formal procedures for recording the existence of an as yet unregistered interest in land, by the recording of notices. This is known as a “settlement notice” in Queensland and a “priority notice” in Tasmania.
The Agreement should clarify in the clause who has responsibility for drafting and lodging the caveat form and who will pay the lodgement fee. Once you have been given details regarding the property upon which the caveat is to be lodged, you should conduct a search to ensure that the purchaser/customer has a connection to the property.
When you are ready to sell your business and begin the next chapter, it is important to understand the moving parts that will impact a successful sale.
This How to Sell Your Business Guide covers all the essential topics you need to know about selling your business.
The Process for Removing a Caveat
You can remove a caveat in several ways, however, most commonly is when the owner of the property issues a lapsing notice and then serves it on the person/party who has lodged the caveat.
The caveator has 21 days from the date of service of the lapsing notice to seek an order from the Supreme Court of NSW for an order extending the operation of the caveat.
What if the Caveat Has Not Been Lodged Properly?
If you lodge a caveat without having a caveatable interest or a reasonable cause, you may be liable to compensate any person who suffers a resulting pecuniary loss. For example, if you have taken steps to lodge a caveat over a property where you do not have a caveatable interest, and this stops a settlement or sale of the property, you may be liable to pay damages to the injured proprietor for any loss suffered. Also, you will be likely liable for their legal costs (as well as your own).
Key Takeaways
A caveatable interest must be a recognised legal or equitable interest in land. Personal or contractual rights alone are insufficient. Lodging a caveat without a valid interest risks compensation liability. Businesses should confirm their interest is genuine before lodging, and document the basis clearly.
Frequently Asked Question
A caveatable interest is a legal or equitable interest in land that allows you to lodge a caveat on the property title. It must be a genuine proprietary interest in the land, not just a personal right.
Common examples include a purchaser’s interest under a sale contract, an equitable mortgage, a lease or a charge over the property. These interests must relate directly to the land itself.
A debt, a right to payment or a general contractual claim is not enough. You must show a direct connection to the land, not just a claim against the owner.
You need a valid caveatable interest to lodge a caveat. Without it, the caveat can be removed and you may be liable for costs or damages for wrongly lodging it.
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