5 FAQs About Caveats

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Table of Contents

• 1. What Is a Caveat?
• 2. How Do I Determine Whether I Have a Caveatable Interest?
• 3. How Do Caveats Work?
• 4. Can Caveats Be Removed?
• 5. I Want to Lodge a Caveat. Where Do I Find the Forms?
• Key Takeaways

You may have heard of a caveat within the context of property disputes. A caveat is a statutory injunction. It places a warning on a land title, safeguarding your interests in the land.  Registering a caveat on another party’s land allows you to prevent them from selling the property unless they settle their debt with you. However, many common misconceptions exist regarding when to use a caveat. Lodging a caveat incorrectly can result in significant legal trouble and fines for you. This article will explain how caveats work and when to use them effectively to protect your interest in a property.

1. What Is a Caveat?

A caveat is a specific tool that someone can use in the context of property transactions. 

When you register a caveat against the title of a property, it prevents the owner of the property from conducting certain dealings with the land without your consent.

If you have a caveatable interest in a property that someone else legally owns, you may be able to lodge a caveat on that property. By lodging a caveat, you are notifying others that they will not be able to purchase the land without first dealing with you. 

Caveats operate by updating the Land Registry and temporarily halting property sales. This pause button proves beneficial in disputes over ownership. It provides time for legal resolution. Strategic use of caveats includes scenarios such as:

• safeguarding property interests during a pending commercial lease; 
• preserving rights after lending money for a mortgage; or 
• claiming priority during a land acquisition before settlement.

However, many Australian states now allow the use of a new instrument called a priority notice to substitute caveats in some scenarios. For instance, if you have agreed to purchase a property and plan to lodge a transfer, you can register a priority notice to maintain your interest on title until settlement.

2. How Do I Determine Whether I Have a Caveatable Interest?

It is a common misconception that you can put a caveat on someone’s land simply because they owe you a debt. This is not true and you should not rely on this. In fact, you can only lodge a caveat over someone’s land if you have a caveatable interest. 

These interests do not automatically arise from debt. Further, simply putting a clause in a contract that says you can lodge a caveat over another person’s land does not necessarily provide a caveatable interest in that land.

Rather, the contract itself needs to be supported by rights that arise from the land or where the property situated on the land is being used as security. 

These rights could arise if you:

• contributed financially to the purchase of the property;
• contributed to the maintenance or upkeep of the property; or
• have some form of agreed entitlement to the property which you have relied upon in the past.

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.

If you lodge a caveat without having a caveatable interest, the property owner can go through an application process to remove it. They can also bring a claim against you for any losses that they suffered as a result of the caveat.

3. How Do Caveats Work?

Although different government bodies administer caveats, the rules for caveats are broadly similar across Australian states and territories.

When you lodge a caveat on a property, you are:

1. updating the official government property registration system; and
2. preventing the property owner from legally selling their land. 

If the property owner is trying to sell the property and you want to prevent this, lodging a caveat essentially pushes the pause button. This can be particularly useful if there is a dispute over ownership, as it gives you time to go to court and argue your case. 

For example, you could lodge a caveat:

• after lending someone money to purchase a home, rather than giving a mortgage, you may lodge a caveat instead; or
• when your business is expanding. You may have recently agreed to purchase some more land, but the transaction will not be settled for another six months. In the meantime, you can lodge a caveat over the property to claim priority over potential third-party claims on the property.

Being proactive about protecting your interests can save you a lot of trouble down the track. However, caveats have their limitations. 

Your caveat could sit there for many years until the owner needs to sell the land or wants to refinance. At this stage, the caveat becomes useful leverage.

4. Can Caveats Be Removed?

In most states and territories, if your application is successful, the caveat will stay there indefinitely or until someone removes it.

If the current property owner wants to sell their property, they have two options: 

1. negotiate with you to withdraw the caveat; or 
2. submit a lapsing notice to the relevant government office.

If they submit a lapsing notice, the government office will notify you. You will then have either 14 or 21 days (depending on the state) to apply to the Supreme Court for an order to maintain the caveat.

If you choose this path, there will be a court case over your claim to the land. During legal proceedings, the caveat will remain. Depending on the course of the legal proceedings, the property transaction may not settle for a long time.

If you do not apply to the court to maintain the caveat, your caveat will be automatically removed after 14 or 21 days. After that, you will not be allowed to lodge another caveat on that property.

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5. I Want to Lodge a Caveat. Where Do I Find the Forms?

Below is a list of the relevant state government websites to lodge a caveat. It is always recommended that you seek legal advice before lodging a caveat.

Key Takeaways

A caveat is a valuable tool to protect your interest in land and provide you with leverage in a dispute. However, you should proceed with caution. Always ensure that you actually have a caveatable interest before you lodge a caveat. If you do not, the property owner will potentially have grounds to sue you. 

If you need help understanding caveats, our experienced property and leasing lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.