Caveats: What, when, how and why?

What is a caveat?

In general terms, a caveat is a notice that is lodged against the certificate of title for someone else’s land.  The person who registers a caveat is known as the “caveator”.

A caveat serves as a notice that the caveator claims an interest in the land subject to the caveat, even though the caveator may not be the legal owner of the land.  Lodging a caveat means that the owner of the land cannot transfer, mortgage or otherwise deal with the land without the caveator’s consent (unless the caveat is released or a Court orders otherwise).

It is important to remember that a caveat does not create an interest in land – it is simply notice that an interest is claimed by the caveator, which can be disputed by the land owner.

When and why would you register a caveat?

Only a person with a “caveatable interest” in land can lodge a caveat against it. What is a “caveatable interest” will depend on the circumstances, but some common examples are:

• Interest of a purchaser who has an agreement to purchase land;
• Interest of a person who has an option to purchase land;
• Interest of a mortgagee/lender where there is an agreement to mortgage land;
• Interest of a beneficiary who has an interest in land under a trust or estate;
• Interest of a tenant who has a lease of land.

The most common situation we see as lawyers is where a purchaser has signed an agreement to purchase land and the settlement date is some time away.  In that case, the purchaser can lodge a caveat against the title to stop the owner from dealing with the land before the sale is completed.  

Another common example is where a family member has loaned money secured by an agreement to mortgage, rather than a full registered mortgage.  In that case, the lender can lodge a caveat to ensure that there is notice on the title of the agreement to mortgage.

As mentioned above, the caveator must have a “caveatable interest” to lodge a caveat.  Some examples of when a caveat cannot be used are:

• A lender who is owed money by a borrower cannot lodge a caveat  against land owned by the borrower (unless there is a mortgage, agreement to mortgage, or other charge in place);
• A shareholder in a company cannot lodge a caveat against land that the company owns.

If a caveat has been lodged without reasonable cause, the caveator may be liable for loss and expenses caused to the land owner or any person who suffers loss resulting from the wrongful registration.

How is a caveat lodged?

If you have an interest in land that you believe can be protected by a caveat, you need to contact your lawyer to prepare an authority and instruction form. This form is the authority required to register an interest in land.

Your lawyer can sign this form on your behalf “as agent” and arrange for it to be lodged. This process can occur relatively quickly, provided you have the relevant information available for your lawyer.  Land registration fees will apply.

How can a caveat be removed?

The easiest way to remove a caveat is for the caveator to agree to withdraw the caveat. Similar to the lodgement process referred to above, the caveator simply needs to sign an authority and instruction form for the withdrawal of the caveat, which is then registered. Unlike lodging the caveat, the lawyer for the caveator cannot usually sign the authority and instruction form as agent for the withdrawal of the caveat – it must be signed personally by the caveator in most circumstances.

If a caveator does not agree to withdraw a caveat and the land owner believes it is wrongfully recorded, the landowner can:

• Apply to the High Court application to have the caveat removed;
• Apply to the Land Registrar to remove the caveat or have it lapse.

Where the land owner has applied for a caveat to lapse or be removed, it will be up to the caveator to prove that the caveat is supported by a caveatable interest and should remain lodged against the title to the land.

Conclusion

If you have an interest in land which you would like to protect, a caveat may be a suitable way to do so.  On the other hand, if you are a land owner who has had a caveat lodged against the title to your land, you have the option to apply for removal if you believe the caveat is wrongfully recorded on the title.

Talk to your lawyer for advice regarding your particular circumstances.

If you would like further information please contact Zane Mora.