You may have heard of a caveat within the context of property disputes. By registering a caveat on another party’s land, you can prevent them from selling their property without repaying their debts to you. There are many common misconceptions about when you should and should not lodge a caveat. If you lodge a caveat incorrectly, you may have to pay large fines. This article will set out:

  • how caveats work; and
  • when you should use caveats to protect your interest in a property.

1. What Is a Caveat?

A caveat is a specific tool which 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.

For example, consider a typical commercial property deal. It does not happen overnight and can be complicated and require the involvement of third-party financiers. Given that there will be large sums of money moving around, the people involved will want to ensure that their stake in the property is protected. Caveats are commonly lodged for this purpose.

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. 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 the rights you have in the land. 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.

Given these limitations, there are many examples of situations where you probably will not be able to lodge a caveat.

For example, someone owes your business money for goods which you provided them. You want to prevent them from selling their property because you are concerned they might not be able to repay your debts.

Unfortunately, since the debt they owe you relates to goods, rather than property, you will not have a caveatable interest.

If you lodge a caveat without having a caveatable interest, the property owner will just remove it. They can also bring a claim against you for any losses that they suffered as a result of the caveat.

For example, if the owner of the property is not able to sell their land due to your caveat, the compensation they could claim you for would be very substantial.

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:

  • when planning to take on a commercial lease in a busy part of town. You have signed an agreement to lease with your future landlord. Here, you can lodge a caveat to ensure that the property is not sold in the meantime;
  • after lending someone money for their mortgage. You are concerned that the person you loaned money to is trying to sell their property to a third party. To prevent this, you can lodge a caveat
  • when your business is expanding. You have recently agreed to purchase some more land, but the transaction won’t 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. 

For example, you cannot use a caveat to quickly force someone to pay you money due under a contract. 

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 go down 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 the 14 or 21 days. After that, you will not be allowed to lodge another caveat on that property.

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.

State/Territory Where can I find the relevant lodgement forms?
NSW NSW Land Registry Services website
Victoria Land Use Victoria website
Queensland Business Queensland website
South Australia Land Services SA website
Western Australia Landgate website
Northern Territories Northern Territory Government website
Tasmania Land Information System Tasmania (the LIST) website

Key Takeaways

A caveat is a useful 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. 

LegalVision does not assist with lodging caveats. But we hope you find this article helpful!

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