1 June 2018
What is a caveat?
A caveat is a statutory instrument created by the Real Property Act 1900 (RPA) that is lodged with the Land Titles Office, now known as the Land Registry Services (LRS). The document, amongst other things, should set out the caveator’s interest in the land and how it comes about.
When is it used?
A caveat prohibits the next dealing registerable.1 That means any transaction in relation to land such as a transfer, mortgage, easement, lease, covenant or subdivision will not be registered until the caveat is removed. Caveats are often used to secure a property where the caveator believes he has a “caveatable interest” over the land.2
What is a caveatable Interest?
A common example of a caveatable interest is where two parties enter into an agreement to purchase land but said land is only registered in one party’s name. The party whose name does not appear on title has a caveatable interest. Another example is where a dealing in relation to land has taken place but has not been registered.
When to lodge a caveat?
Subject to legal advice specific to your circumstances, a caveat should be lodged where you have a caveatable interest over land. However the caveat becomes a more important step to take if there are concerns the registered proprietor will deal with the land in a manner contrary to your interests.
What are the requirements of a valid caveat?
The requirements of a valid caveat include but are not limited to:3
- The name and address of the caveator,
- Particulars of the legal or equitable claim that gives rise to the caveatable interest,
- Verification by way of statutory declaration stating an honest belief of a valid claim, and
- The signature of the caveator or his solicitor.
A mechanism for the removal of caveats from title is known as a lapsing notice.4 This requires the registered proprietor of the land to approach the LRS and obtain a lapsing notice which he then must serve on the caveator. Upon service of the lapsing notice, the caveator has 21 days to bring his matter before the Supreme Court and seek an extension of his caveat.
A registered proprietor of land may choose not to issue a lapsing notice rather approach the court directly and seek the removal of a caveat.5 Usually this is because the matter is urgent. However the usual manner these matters come before the court is because the registered proprietor of the land has issued a lapsing notice and the caveator seeks to have the caveat extended.
Court’s DeterminationIn determining whether a caveat should be removed under the RPA,6 it should be noted that even where it was properly lodged, the court may reject it. For example, the court may permit the removal of a caveat in circumstances where the registered proprietor can put up adequate alternative security.7
When determining whether a caveat should be extended, the court must be satisfied the caveator’s claim has or may have substance.8 It’s often held that the court approaches extensions of caveats in a manner similar to injunctions in that it will also consider the balance of convenience and other discretionary factors. The balance of convenience doesn’t always favour the caveator even if the caveat is valid. Sometimes instead of extending the caveat a court will request the registered proprietor put up some other security9 or place funds into the court account in place of the original caveat.
Lodging Subsequent Caveats
If a caveat has been lapsed or the court has ordered its withdrawal, the same caveator must not lodge a similar caveat without leave of the court or the registered proprietor.10 In this regard “similar” means having the same estate, interest or right purported to be based on the same facts.
Invalid caveats & the consequences
If a caveat is deemed to be lodged or lapsed “without reasonable cause” the party procuring the caveat or the lapsing notice as the case may be, may have to pay compensation.11 Alternatively costs of the proceedings may be awarded in favour of the aggrieved party where the court finds the caveat was not correctly drafted.12
Solicitors who lodge or assist clients in the lodging of caveats over properties, where there is no valid caveatable interest, may be subject to sanction from the NSWLS.
Mersal & Associates specialises in caveats. If you have an interest in land that you wish to protect call us today to arrange an appointment.
1 Real Property Act 1900 (NSW) s 74H.
2 Ibid s 74F(1).
3 Ibid s 74F(5).
4 Ibid s 74J.
5 Ibid s 74MA.
7 Marinkovic v Pat McGrath Engineering P/L (2004) 61 NSWLR 150; Awadallah v Hymix Australia Pty Ltd  NSWSC 117.
8 Real Property Act 1900 (NSW) s 74K.
9 Kingstone v Crispel P/L (1991) 5 BPR 11, 987; Awadallah v Hymix Australia Pty Ltd  NSWSC 117.
10 Real Property Act 1900 (NSW) s74O.
11 Ibid s 74P RPA.
12 Gilles v Salem  NSWSC 506.