What is a Caveat?

Your Guide to Caveats

The first time most of us hear about a caveat is when we’re buying a property, and the conveyancer asks if “you want to lodge a caveat?”. If you’re unsure of how you’re supposed to answer, we’ll help clarify things in this article.

What is a Caveat?

Simply put, a caveat is a legal notice registered on the title to the property, which protects your interest in the property on which you lodged the caveat. This gives you, the caveator, a ‘priority interest’ in the property which prevents third parties or the registered proprietor from dealing with the property without your knowledge.

While this might sound great to some however, not anyone can apply for a caveat.

The most common type of caveat is the purchaser’s caveat. When a purchaser buys a property, the purchaser’s caveat essentially notifies others that the purchaser has entered into a contract of sale to buy the property. This restricts the title being dealt with any further, thus protecting the purchaser’s interest in the land. A purchaser’s caveat automatically lapses when the purchaser becomes the registered proprietor on the title.

Caveatable Interest

To register a caveat on the title of a property, you need to have a caveatable interest first.

There are a variety of different scenarios in which you might have a caveatable interest, for example:

• If the Contract of Sale has been signed for the purchase of the property;
• If you have contributed to the property but are not registered on the title (often seen in Family Law scenarios or joint ventures);
• If you are involved in an Estate Dispute with multiple beneficiaries;
• If you require added security for certain business transactions;
• If you are in a debtor-lender situation and the borrower has provided the lender with a written mortgage or charge over the borrower’s property to secure repayment of the loan; or
• If you are a tenant (only in certain circumstances).

Because every situation is unique, you should discuss your circumstances with your conveyancer or lawyer to determine if you have a caveatable interest. In some instances, there are special conditions in the contract of sale of property that prohibit you from being able to lodge a caveat. This is common when you are purchasing a property off-the-plan.

In summary, your caveatable interest will arise in one of two ways:

1. The owner of the property grants you the right, in writing, to lodge a caveat over the owner’s property; or
2. Your right to lodge a caveat arose as a result of the operation of the “law of equity” i.e. the law of fairness. This type of caveatable interest is called an “equitable caveatble interest”.

Should I Lodge a Caveat?

This is a question you’ll want to talk through with your conveyancer or lawyer. In terms of some general benefits, caveats can deter the registered proprietor or potential third parties such as the mortgagee, from proceeding with their dealings by warning them of your claim.

Additionally, it alerts you of any third-party dealings on the title so that you have the chance to oppose them. This is especially important where you have deposit monies at risk or you release the deposit under Section 27 of the Sale of Land Act 1962 (VIC).

This is especially handy in paper settlements where there is often a registration gap that can leave you open to title fraud or another party registering a caveat. If this were to occur, you could be in a situation where settlement has occurred and you are unable to become the registered owner of the property.

It is also helpful in high-risk property settlement or where a dispute may have occurred. I notifies lenders or other parties that the property is under contract.

That said, there are some risks that you’ll want to consider and talk through with your conveyancer or lawyer.

Feeling ‘wronged’ or ‘owed’ something by the owner does not give you a caveatble interest and therefore the right to lodge a caveat on the title to the owner’s property. Lodging a caveat incorrectly can leave you liable for damages and legal proceedings.

Also, keep in mind, each state and territory has different laws surrounding caveats (in Victoria, it’s the Sale Of Land Act 1962 (VIC), so make sure to clarify this with your conveyancer or lawyer.

Removing a Caveat

On the flip side, if a caveat has been lodged on your property you might find that your ability to finance and transact with your property has been negatively impacted. Caveats are, after all, Latin for ‘warning’ and often look like a red flag to potential buyers and lenders.

Notably, caveats can be removed. There are a few different options for caveat removal that our property lawyers can discuss with you. These include:

• Withdrawal of the caveat by the person who lodged it
• Removal of the caveat by order of the Supreme Court
• Automatic lapse of the caveat under a lapsing notice issued by a third party
• Cancellation of the caveat by the Registrar of Land Titles

Our conveyancing lawyers at Conveyancing Depot will be able to help you find the best option for your situation. We can help advise you on your property rights.

Contact one of our conveyancing experts to discuss your matter on 1300 900 440 or use our online form.

We help clients with residential and commercial property transactions.

FAQ – What is registration gap?

A registration gap mainly occurs in paper settlements. After a paper settlement occurs and monies are paid, the title is still in the name of the Vendor or Seller. There is a period of time before the title is transferred into the purchaser’s name. This time period is called a registration gap. There is a risk during this time that someone lodges a caveat or deals with the title and prevents the purchaser from registering the property in their name.

A caveat is a protective measure to prevent this from occurring when lodged after the purchase of the property but before settlement. It is similar to an insurance policy to ensure your interest in the property as a purchaser is protected and you become the registered proprietor. Today, most settlement are electronic. However they can still be done “on paper” if the system has an outage, which does occur.