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.
There a number of questions that come up when discussing caveats so here are a few of the common ones:
WHAT CAN I PUT A CAVEAT ON A PROPERTY FOR?
There are multiple reasons for lodging a caveat some of which are:
- A right of an individual who has contributed to the “acquisition, maintenance and improvement” of the land;
- Unregistered mortgages and Loan Agreements;
- Unregistered leases;
- Caveats by authorities (such as for unpaid taxes or rates);
- Charges on the land for commercial ventures;
- A Purchasers interest in a contract to buy land;
- As a beneficiary to a Will
- As beneficiary of a Trust
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. This is not enough in South Australia for one person to just owe another person money as there must be a real connection with the land. The Lands Titles Office will examine a caveat before it is registered on a Title to ensure the reason for the lodgement is valid (a caveatable interest), however the merit of a caveat is a matter for the parties involved.
CAN I STILL DEAL WITH THE LAND IF A CAVEAT HAS BEEN LODGED?
It will not always be possible to register any dealing with the land unless the caveat allows it (which most do) and the dealing is made subject to the claim in the caveat. It also will depend on what the dealing is and whether or not the claim supporting the caveat is strong. If the caveat is removed then any subsequent dealings can proceed.
For instance if it is a new mortgage then the lender may require the caveat to be withdrawn before finalising a new loan or they could lodge the new mortgage subject to the caveat (unlikely)
If the property is being sold then the caveat will need to be withdrawn and satisfied prior to settlement.
The caveat is just a protection measure and it is important to seek advice before lodging or removing a caveat and also have a discussion about what next steps to take.
If the claim arises out of a relationship breakdown then it is best to seek legal advice and undertake proceedings in the Family Court.
If the claim is for an unregistered mortgage then you may still be at risk if the property is sold by the lender under a power of sale. The caveat is automatically removed in this circumstance and you may not have rights to outstanding monies after settlement.
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.
DO I HAVE TO DISCLOSE THE CAVEAT WHEN SELLING THE LAND?
Yes you do! In South Australia this gets disclosed in the Form 1 document which is the document which must be provided upon any sale of land. If the caveat is not disclosed correctly then the Purchaser may be entitled to void the contract.
HOW DO I A REMOVE 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.
IF I LEND MONEYTO SOMEONE WHO IS BUYING A PROPERTY CAN LODGE A CAVEAT TO PROTECT MY INTEREST?
If it is a loan then Yes you can but you could also lodge a registered mortgage over the property as well if there is no other lender involved. It also will depend upon the intention behind the payment towards the purchase. If it was a gift then the answer would be no.
IF I REMOVE THE CAVEAT, CAN I PUT IT BACK ON LATER?
A Caveat can only be lodged once for the same reason so you may need to apply to a Court before lodging another caveat. As with any caveat there is always a risk that other parties may have a claim against the property first.
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 the it is best to talk to your conveyancer or solicitor to advise you and arrange for the preparation and registration
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers