What is a caveat and how does it work?
The word caveat derives from Latin and means ‘beware’. A caveat maybe lodged over the title to a property and acts as a warning to anyone who wants to deal with that property, that someone else’s claimed interest has priority. Once a caveat is lodged, and so long as it remains in force, a caveat will prevent registration at the Titles Office of some other dealing in relation to the property e.g., a transfer of the property or registration of a mortgage, unless the person who lodged the caveat (known as the ‘caveator’) is notified and consents to the subsequent transaction.
Who can lodge a caveat?
Anyone who claims an interest in the land may lodge a caveat. For example, where a purchaser signs a contract to purchase a property, the purchaser acquires the right to register a caveat to protect their interest. The caveat protects the purchaser from further transactions occurring in relation to property prior to the settlement date.
There are many other interests in land may that allow a person to lodge a caveat over the title of a property e.g., a life tenant, equitable owner or lender. Importantly, the existence of a debt is never, of itself, grounds to justify a caveat. The debt must be supported by documentation in writing and provide for the property to be charged with the liability to pay the debt or the intending caveator may have a court order permitting the lodging.
To determine whether an interest in a property is a caveatable interest, it is prudent to discuss the matter with a lawyer. In some situations it may be determined that you do not have a caveatable interest or that there is a contractual prohibition on the lodging of a caveat e.g., under an off the plan contract of sale. A wrongly lodged caveat can have adverse consequences for the person lodging it (see below).
Timeframe for Registration of the Caveat
A caveat should be lodged as soon as a caveatable interest arises in the property. If a caveat has not been lodged immediately, there is a danger that another party may register a transaction that affects the property and the intending caveator may lose priority.
Notice from the Registrar of Titles
The Registrar of Titles is required to send a notice to the registered proprietor of the property when a caveat is recorded against the title. This makes the owner of the property aware of the caveat and provides them with the opportunity to take steps to have the caveat removed if the claimed interest is disputed.
The Registrar of Titles does not have the legal authority to ensure that the caveator is entitled to the particular estate or interest claimed in the caveat. Any objection to a caveat is a matter for resolution between the parties or through the Supreme Court.
Removal of a Caveat from Title
A caveat can be removed from the title to the property by a number of means:
- Withdrawal of caveat, signed by the caveator or their solicitor. The withdrawal of caveat form must be lodged at the Titles Office, together with the prescribed lodgment fee; or
- Lapsing, because the interest claimed under the caveat is satisfied by the registration of another dealing e.g., a withdrawal of caveat is not necessary if the property is being transferred to the caveator.
- Removal where a caveator refuses to withdraw the caveat or cannot be located. An application is made to the Registrar of Titles under section 89A of the Transfer of Land Act 1958 (Vic) and is supported by a solicitor’s certificate to the effect that the caveator no longer has the interest claim in the property; or
- Order of Supreme Court. The court has a wide discretion and may order removal of a valid caveat if there is not practical advantage in it being maintained or it is possible to resolve the dispute by securing the proceeds of settlement.
Wrongful Lodgement of Caveat
A person who lodges a caveat without reasonable cause shall be liable for any loss or damage that follows. Further, a solicitor who lodges a caveat knowing that there is no legitimate basis for the caveat will be guilty of professional misconduct and may be personally liable for damages.
Author: Cathy Drake