The term caveat derives from the Latin term ‘beware’, essentially it is a warning or caution. A caveat can be placed on a Certificate of Title to protect a person’s unregistered interest in that land. A mortgage agreement or a spouse’s interest in land are examples of this. A caveat can prevent any further dealings with the property until that unregistered interest is dealt with.
It is a common misunderstanding that a person/party can lodge a caveat over the property of a person who is in debt to them to secure the repayment of that debt. The Lands Titles Office will examine a caveat before it is registered on a Title to ensure the reason for the lodgment is valid (a caveatable interest), however the merit of a caveat is a matter for the parties involved.
The consequences of lodging a caveat that has no merit is that the person who lodged it (the caveator) will be liable to pay compensation to a party who suffers any type of loss due to the caveat unnecessarily been put in place. The legal costs are quite high if there are objections from both parties about the merit of the caveat. To remove the caveat without an agreement between the parties can require either an application to the Registrar General or an Order of the Supreme Court. In both instances, the caveator will be obliged to commence Court proceedings or defend proceedings to prove their caveatable interest. The risk of these Court proceedings is that if you are unsuccessful in proving a caveatable interest the costs will be claimed from you.
It is not always easy to determine whether you have an interest in a property by reason of a debt or agreement. It is important to seek competent legal advice in any case where you are considering lodging a caveat against someone’s property. If you think you have a legal interest and want to protect that interest, McKay Business Services can advise you and arrange for the preparation and registration of a caveat on your behalf.