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WHAT IS A CAVEAT AND WHAT DO THEY DO?

There is often misunderstanding in relation to what a caveat actually is and what a caveat does.   This blog answers all the questions commonly asked by clients in relation to caveats.

 

  1. What is a caveat?

A caveat is a notice to the Registrar of Titles (at the Department of Natural Resources and Mines) and which, subject to some exceptions, has the effect of prohibiting the registration of a land interest dealing (unless that dealing is expressly permitted by the caveat) affecting the interest claimed by the caveator until the caveat is withdrawn, removed, lapses or is cancelled.

A purpose of a caveat may be to allow time for parties to apply to the court to enforce or determine an interest in land. Alternatively, the purpose may be to alert a third party as to the interest claimed.

A caveat is commonly used in the breakdown of relationships so that one party can preserve their interest in a property which may be in the name of the other party, but where both parties had made contributions to the property and the relationship.

A caveat must include (among other things):

  • The name and address of the caveator (the person who lodges the caveat);
  • The name and address of the caveatee (the registered owner) and any other party having an interest in the property (for example, any mortgagee);
  • The interest claimed by the caveator; and
  • The grounds on which the interest is claimed.

The caveat must be signed by the caveator or on or behalf of the caveator by the caveator’s solicitor.

Because of the significance and impact a caveat may have, we require all caveats to be signed by the client (the caveator).

 

  1. Who may lodge a caveat?

 There are a number of persons who may lodge a caveat, including a person claiming an interest in a lot to be transferred or a person who has the benefit of an order of an Australian court restraining the registered proprietor from dealing with the property/Lot.

 

  1. What is an interest?

 An interest means:

  • A legal or equitable estate in land or other property; or
  • A right, power or privilege over, or in relation to land or other property.

 

  1. What are the grounds to claim an interest in a property?

In order to establish that you have a caveatable interest over the property, a caveator needs to show that they have sufficient interest over the property. This may be in the form of an equitable mortgage (for example, when a parties’ relationship breaks down) or that they are the buyer of the property where settlement is not to be effected for some time or where proceedings are on foot and the registered owner is attempting to sell the property. These are just some examples.

 

  1. Liability for Lodgment of a Caveat

A person who lodges or continues a caveat without reasonable cause must compensate anyone who suffers loss or damage as a result. It is therefore essential that a caveat be lodged if there is a cavetable interest and the caveat is lodged with reasonable cause.

 

  1. Who receives notice of the caveat?

The Registrar must give written notice of the caveat to all persons whose interest, or whose right to registration of a dealing on title, is affected by the caveat. This includes (for example), the registered owner of the property and any mortgagee which has a mortgage over the property.

 

  1. How is a caveat withdrawn?

A caveat may be withdrawn at the caveator’s request at any time. A request to withdraw a caveat document must be signed and lodged with the Registrar.

A caveat which has been lodged without the consent of the registered owner will lapse within 3 months if the caveator does not initiate court proceedings to enforce their rights.

 

  1. Lapsing of a caveat

The registered owner may serve a notice requiring the caveator to initiate court proceedings to establish the interest claimed in the land within 14 days of receipt of the notice. The registered owner must also notify the Registrar of Titles that such a notice has been issued.

If the caveator receives such a notice, the caveator must do two things to stop the caveat lapsing:

  • Initiate proceedings in a court of competent jurisdiction to establish the interest claimed under the caveat within 14 days of notice being served; and
  • Notify the Registrar within 14 days that proceedings have been started and identify the proceedings.

If the caveator does not comply with both requirements above, the caveat lapses.

If the registered owner does not serve a notice under section 126(3) of the Land Title Act, as described above, on the caveator, the caveator must still take action to stop the caveat lapsing by:

  • Initiate proceedings in a court of competent jurisdiction to establish the interest claimed under the caveat within 3 months of the lodgment of the caveat; and
  • Notify the Registrar within 13 months that proceedings have been started.

If the caveator does not comply with both requirements, the caveat lapses.

 

  1. What proceedings must be commenced?

Proceedings must be commenced in a court of competent jurisdiction to establish the interest claimed under the caveat.

 

  1. How is a caveat removed?

The registered owner may apply to the Supreme Court for an order for removal of the caveat. The Supreme Court may make an order determining whether or not the caveator has been served with the application and may make the order on terms it considers appropriate.

 

  1. Injunction supporting caveat

If you are seeking to restrain dealings in a property, one option is to seek an interim injunction in the Supreme Court of Australia, restraining dealings with the property. A copy of the injunction can then be lodged with the caveat to support the caveat.

With an injunction supporting the caveat, the caveat will not lapse.

 

  1. How is a caveat cancelled?

The Registrar may cancel a caveat on receipt of a Form 14 General Request if:

  • The interest claimed by the caveator has ceased or the claim has lapsed, been abandoned or withdrawn;
  • The claim has been settled or satisfied; or
  • The nature of the interest claimed does not entitle the caveator to prevent registration of an instrument that has been lodged.

The Registrar must give 7 days’ notice to the caveator before cancelling the caveat.

 

  1. Can a second caveat be lodged? 

A person may not lodge a further caveat for the same property on the same or substantially the same grounds as the first caveat without permission from a court of competent jurisdiction.

 

If you are thinking of lodging a caveat over a property, please contact us and we can advise as to whether or not you have sufficient grounds to establish a caveatable interest in the subject property.

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