What is a Caveat, and Why Do You Need One?

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Table of Contents

• What is a Caveat?
• Reasons for Lodging a Caveat
• What is a Caveatable Interest?
• What Detail Does a Caveat Require?
• Challenging or Removing Caveats
• Laws Governing Caveats
• Key Takeaways

As a business owner, you may have an interest or claim in real property. Lodging a caveat can be a powerful tool for legally protecting this interest. In this article, we will explain what a caveat is, how to lodge one and how they can help protect your business assets. 

What is a Caveat?

A caveat is a formal warning or notice that informs the public that someone has a legal interest or claim on a specific piece of land or property. The party who lodges a caveat is also known as a caveator.

Notably, the caveat itself does not grant any actual interest in the land. It is only a notification that a party is claiming an interest. 

Reasons for Lodging a Caveat

Many benefits come with lodging a caveat on a property. First, it can safeguard your legal interests and rights in the property. By lodging one, you can prevent any unexpected or unauthorised transactions from taking place without your knowledge or consent. 

Lodging a caveat is also beneficial when multiple parties seek to claim an interest in the same property. By lodging your caveat first, you can help establish the priority of your claim, putting you in a stronger legal position if a dispute arises. 

When you are a lender or creditor, lodging a caveat can also help protect your financial interests by securing your right to claim the property if the borrower defaults on their payments or obligations. 

What is a Caveatable Interest?

If you have an interest in land that you cannot protect through other means, like registration, you may consider lodging a caveat to protect your legal position. This is known as a caveatable interest. Importantly, ensure you have a genuine interest at the time you are lodging the caveat.

Each state and territory has an individual system of lodging caveats. In New South Wales (NSW), the Real Property Act 1900 governs caveats. When a caveat is lodged, it effectively prevents the registration of further dealings on the property’s title until one of the following:

• the caveator formally withdraws the caveat; 
• the caveat lapses; 
• the caveator consents to another’s registration that deals with the property’s title; or
• a court order removes the caveat.

Any person interested in the land or wishing to make a claim on an estate may lodge a caveat. A person with an Australian court order restraining the registered proprietor from dealing with a property can also lodge one.

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What Detail Does a Caveat Require?

When lodging a caveat in NSW, you must ensure the property’s details are correct. You would do this by inputting the correct folio identifier which corresponds to the property you want to lodge a caveat on.

As a caveator, it is best practice to engage a lawyer or conveyancer who can advise on your legal rights and obligations and the costs of lodging a caveat. Each case varies depending on different factors. Therefore, potential caveators should obtain legal advice before lodging a caveat.

Challenging or Removing Caveats

A person can challenge or remove a caveat in several ways, including the property owner issuing a lapsing notice or the caveator submitting a withdrawal of caveat form. Additionally, in some states, a caveat may be removed by obtaining written consent from the caveator when a new dealing or plan is registered. 

The process of removing a caveat may differ based on which state or territory you are in, in particular:

1. Victoria;
2. New South Wales;
3. Queensland; and
4. Western Australia.

Laws Governing Caveats

The law governing caveats varies in each state and territory. The table below outlines what laws apply in each.

Key Takeaways

As a business owner, understanding caveats and when you can lodge one will be essential when protecting your interests in real property. Before lodging one, you should ensure you have a caveatable interest in the property. Otherwise, you may need to compensate the wronged parties due to an incorrectly lodged caveat.