A person who claims to have an interest in a property can lodge a Caveat to protect their interest and prevent a registered owner from disposing or otherwise dealing with the property (for example, selling or transferring their interest in the property).
Lodging a Caveat is a very serious matter. If you want to lodge a Caveat over another person’s interest in a property, you must have a legal or equitable interest in the property (“caveatable interest”). If you proceed to lodge a Caveat without demonstrating a caveatable interest, you may be required to compensate anyone else who suffers loss or damage as a result of the Caveat.
A person who lodges and obtains the benefit of a Caveat is known as the “Caveator”. A person affected by a Caveat is known as the “Caveatee” (a registered owner or someone else who has an interest in the property).
What is a Caveatable Interest?
The Caveator must have a legal or equitable interest in the property over which the Caveat is lodged. The following are some examples that are capable of giving rise to a caveatable interest:
- A purchaser in an Instalment Contract. In these circumstances, the Caveat will be non-lapsing but will be limited to the duration of the Instalment Contract.
- The interest of an unregistered mortgagee (equitable mortgagee). In these circumstances, the Caveat can only be a lapsing Caveat.
- The interest of a beneficiary of a constructive, resulting from or implied trust.
What is the effect of lodging a Caveat?
A Caveat will:
- prevent the registration of a document (including a prior unregistered document) affecting a property (or an interest in a property) over which the Caveat is lodged until such Caveat is withdrawn, removed, lapses or is cancelled;
- take effect from the date of lodgement in the Land Titles Registry (rather than from the date of registration);
- lapse after three (3) months from the date of lodgement unless the Caveator commences Court proceedings to protect their caveatable interest. In these circumstances, the Caveator must notify the Land Titles Registry of such Court proceedings before the expiry of three (3) months from the lodgement of the Caveat.
However, a Caveat will not prevent the registration of documents identified explicitly in the Caveat as a document to which the Caveat does not apply, nor does it prevent the registration of a document for which the Caveator has given written consent its registration.
Further, a Caveat will not lapse after three (3) months from the date of lodgement if it has been lodged by a registered owner of the property or if the registered owner consents to the Caveat being lodged over the property (except in circumstances where the Caveat is lodged to protect the interests of an equitable mortgagee).
How can a Caveat be removed?
If a Caveatee believes that there are no reasonable grounds for the Caveat, then they must:
- serve a notice on the Caveator, requiring them to commence Court proceedings to establish the interest claimed in the Caveat; and
- within fourteen (14) days of the notice being served, notify the Land Titles Registry of such notice being served on the Caveator.
If the Caveator does not:
- commence Court proceedings within fourteen (14) days after being served with the notice from the Caveatee; and
- notify the Land Titles Registry that the Caveator has commenced Court proceedings to establish the interest claimed in the Caveat;
then the Caveat will lapse. Upon the lapsing of the Caveat, the Caveatee can then lodge a request with the Land Titles Registry for the removal of the lapsed Caveat.
Once a Caveat has lapsed, another Caveat cannot be lodged on the same or similar grounds without first obtaining leave from a Court.
In circumstances where a Caveat needs to be urgently removed (for example, if the Caveat prevents the sale of a property), then the Caveatee must apply to the Supreme Court seeking an Order that the Caveat is removed. If it is determined that the Caveat was lodged without reasonable grounds, then the Court may order that the Caveator pay the Caveat’s costs together with the costs of any other party who has suffered loss as a result of the Caveat.
To learn more about lodging a caveat, contact Delaney & Delaney today.