Caveats are a useful and powerful tool but they can have adverse consequences so it is important to get competent legal advice.
It is a common misconception that if you are a creditor, you can caveat a debtor’s property to secure the repayment of your debt.
This common misconception means you could be exposing yourself to considerable financial risks because you have registered a caveat without necessarily having a caveatable interest.
What is a Caveat?
If you take out a caveat, remember it is merely a notice of claim registered against a Certificate of Title putting the owner, and any persons dealing or proposing to deal with the Title, on notice that you have an interest in the property.
The concept is that a land owner cannot sell land that is the subject of a caveat, without first dealing with your purported interest. Your interest may or may not be a valid one and this will need to be determined. If your interest is valid, the land owner cannot sell until he/she has dealt with you.
Before you caveat someone’s property, you must have a direct interest in that property in law or in equity. It is not always easy to determine this by reason of a debt or agreement and it is important to seek competent legal advice from the DBH team in any case where you are considering lodging a caveat.
Consequences of lodging a caveat where no “interest” exists
A caveat remains effective until it is withdrawn, removed or otherwise extinguished. So long as a caveat remains in force, the Land Titles Office must not register any dealing with the land, such as a transfer following a sale. This means that if you lodge a caveat without merit, it may result in you being liable to pay compensation to any person who suffers a loss as a consequence of the caveat.
Such a loss may happen if the land owner can’t settle on the sale of the land because of the existence of the caveat. The purchaser may then terminate the contract on account of the vendor’s breach (failure to settle) and the land owner subsequently sells the property at a much lower price. This type of loss may include, the difference between the original sale price and the subsequent sale price, re-marketing expenses, interest, costs incurred in removing the caveat etc.
There are two main procedures to remove a caveat.
In each case, if you are the caveator, you must be prepared to incur considerable expense to prove your interest in the property if you do not want the caveat to be removed.
These procedures are:
- Removal by Application to the Registrar General
- Removal by Order of the Supreme Court
In both instances, you will be obliged to commence court proceedings or defend proceedings to prove your caveatable interest. The cost of this will usually “follow the event”, which means that if you are unsuccessful in proving a caveatable interest, you could end up paying and this could be in the tens of thousands of dollars.
A caveat can only be lodged once for any given interest so if the caveat is removed as a result of your failure to prove your interest, you have no further opportunity to caveat the property for the same interest.
It is equally important to seek competent legal advice before applying to the Registrar General for the removal of a caveat. The DBH team can help you with this and all other matters to ensure that you don’t suffer financially now or into the future.