• ASAP Lawyers

What is a caveat?

A caveat is a notice of an interest in the property. It can be registered on the title of the property if you have a caveatable interest. By doing so, you are providing notice to anyone else who tries to deal with the property as to your rights over the property.

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Can a purchaser of real estate lodge a caveat?

As a purchaser of real estate, you are entitled to lodge a caveat at the Land Titles Office to protect your interest as a purchaser. If the Vendor attempts to mortgage or transfer or deal with the land prior to your settlement, either fraudulently or otherwise, you will be notified by the Land Titles Office. This gives you the opportunity to commence legal action to protect your deposit and your interest in the real estate. Such situations often descend into a dispute between two innocent parties and the innocent party who has acted to protect itself by lodging a caveat can be greatly advantaged in such a dispute. Our advice is that all purchaser clients should lodge a caveat.

There are certain situations where we believe it is essential that you lodge a caveat, being if:

  • You are to take possession prior to settlement and will spend money on the land

  • You are distrustful of the Vendor

  • You believe other parties may be seeking to claim an interest in the property

Some “off the plan” sales will prohibit a caveat from being lodged. However, generally, it is our strong recommendation that a caveat be lodged by a purchaser against the title to protect their interests. Without a caveat being lodged on the title, it is potentially possible for an unscrupulous vendor to sell or mortgage the property to another party or for someone else to make a claim to the property, potentially in priority to a bona fide purchaser’s claim.

Competing caveats

If there are multiple caveats on title, on the assumption that the interests are equal in nature (for example if the property is sold twice to innocent but separate purchasers), then the caveat which is registered first will take priority over the subsequent caveats. Therefore it can be critical that a caveat be lodged in a timely manner.

How can a caveat protect a purchaser?

Examples of how such a caveat can protect a purchaser include:

  • In the decision in the High Court case of Black v Garnock (2007), it was held that on the day prior to settlement, a creditor of the vendor took out a writ of execution that prevented the purchaser from registering their interest after settlement. It was held that, because it was registered first, the interest of the creditor ranked ahead of the purchaser. The purchaser lost his money.

  • The lodging of a caveat will prevent a vendor from re-mortgaging the property prior to settlement to a point where there is no equity left in the property come settlement time, at which point it might be difficult to settle as there may not be enough funds to payout the vendor’s existing mortgage.

  • A caveat will also prevent a vendor from reselling the property to someone else without your knowledge.

  • If you were taking possession of the property prior to settlement for the purpose of building prior to settlement, a caveat will help protect the funds you would otherwise be expending on improving the vendor’s land should settlement not proceed.

Typically lodging a caveat will add some fees to a purchaser’s expenses however we believe it is money worth spending.

If you would like to engage property and conveyancing services, please contact us on 03 9450 9400.

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