Caveats On Property Explained
Published 5:53 am 27 Sep 2021
Often considered the “red flag” of real estate, here is everything you need to know about Caveats on properties.
A caveat in real estate is an expression of interest in a property that prevents any new dealings from occurring that relate to that property.
The term Caveat derives from the Latin expression which means to “beware,” and caveats themselves are often considered “warnings” or “red flags” for prospective purchasers, to let them know there is another party with an interest to the property.
It is important to know about caveats in real estate as they can either be a thorn in your side or beneficial to your interests.
So, let us begin by diving into what exactly a caveat is.
What is a caveat on a property?
The word “caveat” is generally used in relation to a title to real estate. It is a document in a form prescribed and approved by the Registrar of Titles in each jurisdiction. A caveat is like a circuit breaker, being a prescribed form, it can be lodged as a matter of urgency by anyone whose circumstances in relation to real estate may be impacted by the conduct of others.
Lodging a caveat against the title to real estate is notice by a person to the Registrar of Titles that he or she requires the prohibition of the registration of any documents concerning the title that affect or impact upon that person’s interests in the real estate. As a consequence, the Registrar is prevented from registering any subsequent documents that are lodged for registration. Someone who successfully lodges a caveat is known as a caveator.
There are two types of caveats: absolute and permissive.
Absolute caveats do not allow any dealings to occur on that property until the caveat has been removed, and permissive caveats allow for dealings on the property if the caveator consents to the dealing.
A caveat can serve as a warning to those that are interested in purchasing property by notifying them that there is already an individual or organisation that has an interest in the property.
As such, caveats can be both beneficial and a hindrance depending on which side of the caveat you are on.
How to register a caveat on a property
Lodging a caveat is not as simple as calling “dibs” on a property you’re interested in, as you must first qualify for what is known as a “caveatable interest.”
The word “interest” has to do with a circumstantial entitlement to real estate. It does not include the ordinary use of the word in social interaction. The words “claim”, “interest” and “entitlement” all very much mean the same thing and go in the one direction as being understood to impact upon title to real estate.
It is very important to determine that you have a caveatable interest prior to registering a caveat as you could be held liable for any financial losses that occur due to the cessation in activity on the property if your caveat is seen as unreasonable or unjustified. Extreme care and attention must be paid to the preparation of the actual caveat document. Names and numbers shown on the current title search must be 100% the same as included in the caveat.
As such, you should always seek legal counsel prior to lodging a caveat on a property. With that in mind, below are some of the accepted caveatable interests.
- A vendor’s lien.
- A purchaser’s lien.
- To protect an interest under a contract for sale.
- To protect a creditor’s right for payment provided under the terms of a contract
Once you have confirmed that you have a caveatable interest, you can then speak with a solicitor to begin lodging your caveat, or you can apply for a caveat yourself in accordance with your state laws.
You will then be required to provide your name, address, details about the situation leading to the caveat, a statutory declaration and several other documents in order to complete the lodging process.
How to remove a caveat on your property
A caveat lodged without merit or on dubious grounds can be withdrawn by the party who lodged it. This will involve the owner making contact with the lodger and outlining the futility of the claim and warning of impending legal action to force its removal at the cost and expense of the lodger.
The most common ground to ignite the removal process is for the owner to lodge what is called a lapsing notice with the Registrar of Titles. The Registrar issues the lodger with a prescribed form giving him or her notice that unless proceedings are commenced in the Supreme Court within a set time for an order upholding the validity of the claim, interest or entitlement to have lodged the caveat, the Registrar will write it off the title, in other words, the caveat will lapse and be of no effect.
On the other hand, if you are dealing with a permissive caveat, the owner may attempt to contact the caveator and ask them to withdraw their caveat or provide consent for them to sell the property. Depending on the contested interest the caveator has in the property, this may require full payment or an agreed reduced payment that satisfies the creditor’s claim.
Caveats will last until they are removed, except in Queensland, in which case there are lapsing and non-lapsing caveats.
A non-lapsing caveat, as the name suggests, will last until it is removed and must be registered by the owner of the property.
A lapsing caveat, however, is a caveat that was not lodged by the registered owner or with their consent, and one that was not lodged as a result of a court order or by the registrar of land titles.
Lapsing caveats will typically last up to 3 months after being lodged.
How much does it cost to remove a caveat on your property?
Whether you are lodging or withdrawing a caveat there is an associated cost. The amount you pay is dependent upon the state you live in, and whether you’re lodging/withdrawing that caveat for one or multiple properties.
In NSW, VIC, WA and SA, the costs to withdraw and/or lodge a caveat for a single property are the same and are as follows:
In TAS, NT, and the ACT, the lodging and withdrawal fees for caveats differ:
|State||To lodge a caveat||To withdraw a caveat|
Buying a house with a caveat
Part of your due diligence prior to buying property or land should be to perform a title search on that property. This is usually done by your solicitor as part of the conveyancing process. It is during this process that the discovery of any caveats that have been lodged on the property’s title will become apparent.
Generally speaking, if you find that the prospective property has a caveat, you will have a very difficult time buying that property – at least until the caveat lapses or an agreed outcome has been reached in relation to the creditor’s outstanding debts.
Caveats are known as the red flags of real estate for a reason!
Caveats: Red flag or useful tool?
Caveats exist for a reason and serve a necessary purpose, though finding a caveat on a prospective property is certainly not ideal and will likely dissuade many potential buyers from pursuing that property. Similarly, if someone lodges a caveat on your property, any plans you might have to sell that property will be delayed for weeks or months.
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