Under section 74F of the Real Property Act 1900 (NSW), a person can lodge a caveat with the Registrar-General if he or she believes they are entitled to a “legal or equitable interest” in the land. A caveat notifies others that you have a proprietary interest in the property and prevents others from dealing with the property without your consent. Specifically, it prevents the Registrar-General from registering any dealings (except for some statutory exceptions) that are inconsistent with the interest of the party who has lodged a caveat.
How Do I Determine if I Have a Caveatable Interest?
It is important to distinguish a caveatable interest from a regular interest in the property. Caveatable interests include:
- An interest as a purchaser under an agreement for sale;
- Vendor’s lien; and
- Purchaser’s lien.
Examples of non-caveatable interests include:
- 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 can claim a caveat (i.e. a chargee/mortgagee). An express interest is where the parties reach an agreement for the caveat to go on the property.
Many people incorrectly assume that a court judgment against another person creates a caveatable interest in that person’s real property, but this is not the case. It may be that once you have obtained a judgment against someone that you can negotiate and agree to create a caveatable interest in the property. You can then lodge a caveat to protect your interest. Parties in some cases 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.
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).
It is important to determine whether you have a caveatable interest in land before proceeding to lodge a caveat. It is not sufficient if someone owes you money to run down to the Land and Property office and arrange to lodge a caveat. If you have any questions or need assistance ascertaining whether you have a caveatable interest, get in touch with our commercial lawyers on 1300 544 755.