What is a caveat? When do I need one?

What is a caveat? When do I need one?

A caveat is a type of statutory injunction used to protect an interest in land or property. It basically acts as a “freeze” on the property and prevents anyone else registering a dealing which may be contrary to the registered interest.

The word caveat means ‘beware’ and operates as a formal warning to the public that that a person or organisation has a priority interest in the property. The party that records a caveat on title is known at the “caveator”. We recommend that parties seek legal advice before lodging a caveat, but this article will explain how to lodge a caveat and why you may need to do so.

How to Lodge a Caveat

Only those with an eligible interest in the land can record a caveat on title. If a party lodges a caveat without ‘reasonable cause’, they may be liable to pay compensation to any person who suffers a financial loss as a result.

Each state and territory has its own system of lodging caveats. In NSW these are lodged through NSW Land Registry Services (LRS).

Step 1: Engage a solicitor or conveyancer to prepare a caveat for electronic lodgement, or download and complete the caveat form and relevant exception form in hard copy.

Step 2: Lodge the hard copies in person at NSW LRS or electronically through the solicitor or conveyancer.

Step 3: The documentation is examined. Particulars of the estate or interest must be set out, including any facts which support the claim. This includes the names and contact details of both the caveator and the registered proprietor. (You may need to complete a title search to ensure this information is correct).

Step 4: If the caveat meets the lodgement requirements, the register is updated. The LRS will provide notice of the caveat to the applicant and will also send notice to the registered proprietor of the title.

Reasons for Lodging a Caveat

A property caveat prevents the registration of an incoming interest or dealing by other parties. It can be used to delay a property transaction which would interfere with your interest.

Examples include:

  • Protecting an interest under a contract for sale (Like preventing the owner from selling to another party during long settlement).
  • Securing a loan. (Making others aware of a bank or lender’s financial interest in the property).
  • Protecting an interest such as a lease or mortgage.
  • Protecting the interests of a partner who’s name isn’t on the property title but has contributed financially to the property.

Challenging or Removing Caveats

If there is a caveat on your title that you think is unreasonable, there are several ways to manage or remove the recorded caveats.

  1. Order of Court: A court can make a ruling to extend or remove a caveat as it deems appropriate. If you suffer financial loss as a result of an incorrect caveat, the court may order compensation.
  2. The Caveat Lapses: This happens when the interest is satisfied through registration of another dealing, or an application for preparation of Lapsing Notice is lodged with NSW LRS.
  3. Withdrawal: The Caveator submits a withdrawal of caveat form.
  4. Obtaining the Caveator’s consent: A caveator may not want their caveat removed but may not object to the lodgement and registration of another dealing or plan. This might be where the new registration doesn’t interfere with the interest. The consent must be in writing and attached to the new dealing.

To Sum up

Caveats allow you to protect an interest in a property. Before lodging a caveat you should take steps to ensure you have a caveatable interest in the property to avoid liability for another parties losses.

If you have any enquiries or need assistance with lodging or removing a caveat, get in touch with our commercial lawyers by completing the form on this page, or calling us on 1300 337 997.

About Ryan Leaney

Ryan works with OpenLegal as paralegal. His main legal interests are Corporate, Property and Employment Law.