What is a caveat?
Under Section 89 of the Transfer of Land Act 1958, a caveat is a legal notice which can prevent any dealings with a property, such as the transfer of the land title, without the consent of the caveat holder. When a caveat is registered it will appear on a property’s title unless withdrawn by permission of the caveator.
When you purchase a property, you may want to lodge a caveat to protect your interest in a property. Additionally, if you are about to purchase a property and there is already a caveat on the title, you should investigate why there is a caveat registered, and to ensure the caveat will be removed before your settlement.
Lodging a caveat does not mean the caveator is the new registered owner of the property. It is merely a notice to prevent the property owner from transferring or selling the property without notice or consent from the caveator.
Do I have the right to lodge a caveat?
Yes, if you have a caveatable interest and there are no special conditions forbidding you from lodging a caveat.
There are several potential caveatable interests under the law. The most common interest is if you are an ‘equitable owner of a property’. In other words, a purchaser who has signed a fully executed contract of sale for a home acquires a caveatable interest under the contract of sale. This is because they will be the owner of the property subject to settlement taking place.
However, if you are the purchaser of an off-the-plan property there will often be a special condition in place to prevent purchasers from lodging a caveat on the title. This is usually to avoid delays in land subdivision and development. Penalties may be incurred to the purchaser if the condition is breached. When there is a registered caveat on a title, the Land Title Office cannot process the registration for the subdivision unless the caveator provides a letter of consent. Could you imagine the number of consent letters the vendor would need to obtain if every purchaser had lodged a caveat on a proposed apartment building?
Additionally, under the legislation any person lodging a caveat without a caveatable interest is liable for damages and compensation caused by the caveat lodgement.
Common misconceptions
There is a broad misconception that if there is a debt owed to you by someone, that gives you a caveatable interest over that person’s property. That is not always true. The debt itself does not automatically create a caveatable interest.
An example of this is if you initially agreed with your neighbour to split the cost of a new fence, and your neighbour refuses to reimburse their share after you’ve paid the full cost. This does not allow you to lodge a caveat over their property unless there was an express (and preferably, written) agreement that your neighbour agrees to allow you to lodge a caveat over their property.
Why should I lodge a caveat?
Lodging a caveat on a title can help prevent a seller from selling the property to another purchaser before settlement. It can also decrease the risk of a third party interfering with a property transaction. For example, a creditor lodging a caveat before you will take priority over you as the purchaser.
When a purchaser’s caveat is lodged, this can also minimise the risk of delaying settlement, as a delayed settlement would incur additional costs.
W Legal Group can help!
Contact our property lawyers at hello@wlegalgroup.com.au and we can help lodge the caveat for you, and answer any question regarding your next property transaction!
