A caveat is a formal notice that has the effect of prohibiting (amongst other things) the following without the consent of the person who lodges the caveat (known as the “caveator”):-
- A registered owner whose interest is affected by the caveat from selling or transferring their interest in that property;
- the registration of an instrument or document over a property, such as a mortgage, lease or any other dealing connected to the affected interest.
In practical terms, lodging a caveat prevents the registered owner dealing with that property until the caveat lapses, is withdrawn or removed.
They are utilised by parties to protect interests on an interim basis until a more permanent interest can be registered and can also be utilised amidst property disputes and can be a useful tool when implemented correctly. For example, caveats are commonly found in wills and estates, property law, commercial law and/or family law scenarios and particularly where there are risks that assets may be disposed of or equity in an asset may be eroded away.
The caveator has up to 3 months to issue legal proceedings to establish the interest claimed by the caveat, before the caveat will lapse. These proceedings must be filed:-
- Within three (3) months from the date that the caveat is registered against the affected interest; or
- Within fourteen (14) days from receipt of a notice from the registered proprietor under section 126 of the Land Title Act 1994 (Qld) (“the Act”).
Under paragraph 2 (above) a registered proprietor has the ability to compel a caveator to issue proceedings by serving a notice.
In the event that the caveator fails to commence proceedings within either of these timeframes, the caveat will automatically lapse and may be withdrawn.
Once lapsed, it is not possible to lodge a second or subsequent caveat on the same or similar grounds without the leave of the Court.
Grounds upon which a caveat may be lodged
There are multiple grounds on which a caveat may be lodged and whether or not a caveatable interest exists in any particular case will be determined on a factual basis, having regard to the circumstances that exist at the time. The following are some examples of common caveatable interests:
- A purchaser under a contract of sale of an estate.
- An unregistered mortgagee of an estate.
- A mortgagor challenging a sale on the grounds that the mortgagee improperly exercised the power of sale.
- A unit holder in a trust may have a caveatable interest in land compromising trust property.
- A beneficiary of a constructive, resulting or implied trust.
The grounds upon which a caveat may be lodged are certainly not limited to the above, and it is important that you seek independent legal advice should you be unsure about the existence of a caveatable interest.
Consequences for lodging a caveat without proper grounds
A person who lodges a caveat without proper grounds may be liable for any loss or damages suffered as a result of the caveat. Section 130 of the Act empowers the court to award compensation in the form of exemplary damages for situations where a caveat has been lodged without a reasonable cause.
The type of interest that constitutes a caveatable interest and the type that does not will depend on the individual circumstances of a particular case. Having said this, the Courts have determined that the following are common non-caveatable interests:
- A beneficiary under a discretionary trust does not have an interest in land owned by the trust that will support a caveat.
- A vendor’s lien (for unpaid purchase money) is not capable of giving rise to any equitable lien on the lot.
- A mere right of pre-emption will not constitute a sufficient interest to support a caveat.
What are the rights and obligations of the party lodging a caveat?
When proceedings are commenced, it is critical that the Registrar is notified when commencing proceedings, as a failure to do so will result in the caveat lapsing – even if proceedings had been commenced within the requisite timeframes.
Registered Owner’s Consent
If a caveator lodges a caveat with the consent of the registered owner(s) of an interest in the lot, the caveat will not lapse. It is important to note however, that merely having the owner’s consent will not constitute valid grounds to lodge a caveat; there must still be a caveatable interest present as discussed above.
How can we help?
It should be clear from this brief discussion that caveats are a very complex area of law with timeframes and procedures that must be strictly adhered to.
Marino Law has extensive experience in acting for persons who wish to lodge caveats over property in order to protect an interest or an entitlement and also for registered owners who have had caveats lodged over their properties. Our solicitors can provide you with practical, cost effective advice as to any matters relating to the law of caveats. Please contact our team at Marino Law to find out how we can assist you.