In this podcast, Business Lawyer, Ben Perfect discusses the matter.
WHAT IS A CAVEAT?
WHAT IS A CAVEAT AND CAN YOU GET ONE?
Dan: You may have heard of the term caveat, and if you’re like many people you probably wrongly assume that it can be used at any time, in any circumstance, to protect your interests, but is that really the case? Well, I’m with Ben Perfect, a solicitor at South Geldard Lawyers. Ben, what is a caveat?
Ben: Hi Dan. A caveat is an instrument that’s registered on the title to a property in the land titles registry. It serves two purposes, firstly, it’s to prevent the registered owner or any other party registering an instrument on the title to the property, such as a transfer. Secondly, it provides a warning to any person that searches that property in the land title register or obtains a title search for that property that another party is claiming an interest in the property. This is particularly important when you’re buying real property, when you’re buying a house or land, to do the title search which is typically done by solicitors to check whether there’s anyone else claiming an interest in the property.
Dan: Ben, is there any specific people or groups of people who are entitled to lodge a caveat?
Ben: Yes, there are. Only a person which has an interest that’s known as a caveatable interest can lodge a caveat over a property, and a caveatable interest has been defined in legislation and case law. It just really means that only a person that’s claiming an interest in the land can lodge a caveat. Now, examples of that include where a party agrees to mortgage their property or charge their property to another security for the payment of a loan, but that mortgage is not registered on the title. Also where a party is a beneficial owner of the property, meaning that they’re not a legal owner registered on the title as an owner, and they wish to protect their interest in the property by forbidding or preventing the registered owner, the legal owner, from dealing with the property such as selling it to another party.
Dan: Ben, we often hear people talk about caveats in the context of, “Oh, look, someone down the road owes me some money so therefore I’m going to now lodge a caveat over their property.” Does that type of approach hold any legal grounding at all?
Ben: That’s a great question, Dan. Typically, I have clients asking this question all the time in debt recovery matters, and the short answer is no, you can’t. Because it’s typically not a caveatable interest. I said up there in examples of what constitutes a caveatable interest and gave an example of where someone agrees to grant a mortgage over the property to secure payment of a loan. So only in those sorts of circumstances where the verbal agreement or the written agreement between the parties authorises the charging of land as security for the repayment of a loan. So you operate a business and you sell goods and services to someone, you give them a tax invoice that says payment due within 14 or 30 days and they don’t pay you, typically that’s not a caveatable interest and you can’t lodge a caveat over their property for that debt. There are ways for you to get around that where you can lodge something called a writ of execution over someone’s property to secure the payment of a debt, but that’s a conversation for another time.
Dan: Now, what about, Ben, if somebody can prove that they have a caveatable interest and they’ve lodged a caveat, what’s the next step after that?
Ben: You’ve got to act quickly once a caveat’s lodged. You’ve only got three months from the date that the caveat is registered on the title of the property to act, otherwise the caveat lapses and you lose the protection that the caveat offers. So within that three-month period you’ve got to commence court proceedings to claim your interest in the property. As I said before, if that’s not done the caveat lapses and it can be withdrawn from the title, and the registered owner is free to deal with the property as they like.
Ben: What also can happen is that the registered owner of the property can give the caveator, the person that’s lodged the caveat, written notice that requires that person to commence those court proceedings within 14 days of the notice being lodged.
Dan: Ben, like most things, getting legal advice early on is obviously recommended?
Ben: Definitely, Dan. Especially in this instance when you’re talking about caveats being lodged on the property, someone claiming an interest in the property, we’re normally talking about a property that’s worth hundreds of thousands of dollars, and if you don’t get legal advice you may be prejudiced if you don’t complete the caveat properly. Your interest could be defeated, and you could lose out, so it’s important that you get advice, timely advice, before you lodge a caveat to ensure that your rights are protected.
Dan: Ben, thanks for joining me.
Ben: Thank you, Dan.