We are often asked "what is a caveat?" A caveat is a useful way to record your interest in a property and stop dealings with the property. Anyone dealing with real estate in Victoria should be aware as to how a caveat can be used and the ways for removing a caveat from a Certificate of Title.
What is a caveat?
A caveat is an instrument that can be registered with Land Victoria to temporarily stop any dealings with a property. A caveat can prevent transfers of a property from being registered on the Certificate of Title and therefore stop someone from taking legal ownership of a property. You can find out if there is a caveat on Title by conducting a title search of the property.
There are many situations where caveats may or should be used, including the following:
- Purchasers of real estate can usually lodge a caveat to ensure that the property is not transferred to someone else prior to their own Transfer of Land instrument being registered at Land Victoria after signing a Contract
- Note that the Contract of Sale may include special conditions preventing the purchaser from lodging a caveat (e.g. in 'off the plan' sales where the property needs to be subdivided before settlement)
- Parties to an agreement may include terms to allow a party to secure their interest under the agreement by lodging a caveat over a property (e.g. to secure a charge under a loan agreement)
- Parties in dispute over a property may lodge a caveat to stop dealings with the property until the dispute is resolved (e.g. by court order under the Family Law Act 1975 or where properties may be subject to trusts)
- Landowners can lodge a caveat on their own property if their Certificate of Title has been lost or destroyed in order to prevent improper dealings with the property (e.g. fraud).
However, there are some limitations to caveats, including the following:
- A caveat can only be lodged by a person with proper grounds to claim an interest in the property
- A caveat will not permanently prevent subsequent dealings with a property. If a subsequent dealing is lodged at Land Victoria, the person who lodged the caveat (called a 'caveator') will be notified by Land Victoria and have 30 days after the notice to commence legal proceedings in the Supreme Court of Victoria to substantiate their interest. The caveat will automatically lapse if no proceedings have been commenced within 30 days, and subsequent dealings can then be registered
- The timing of lodging a caveat is crucial, as any dealings lodged at Land Victoria before the caveat is lodged will take priority.
How do I lodge a caveat?
Land Victoria provides guides on how to lodge a caveat. However, complex issues may arise in lodging a caveat, including the following:
- Land Victoria's prescribed form for caveats must be completed correctly in every particular or else the caveat may not be effective (e.g. the land and the caveator must be correctly identified)
- You may need legal advice as to whether you have proper grounds for claiming an interest in the property, as it is not open for anyone to lodge a caveat on any given property
- There is a risk that the caveat may be improperly lodged, such as without reasonable cause, and in this case you would be liable under section 118 of the Transfer of Land Act 1958 for any loss caused by the caveat (e.g. stopping others from dealing with the property)
- There can be practical difficulties in lodging the completed form at Land Victoria in time to prevent an imminent dealing with the property, noting the priority issue above.
Your lawyer can complete the form and sign on your behalf, or you can sign the form yourself. The completed form must be sent to Land Victoria with the prescribed fee.
From November 2015, Land Victoria requires that any person dealing with real estate in Victoria must have their identity formally verified before the dealing is registered. This includes a caveator. Your lawyer can complete the identification requirements for you.
How do I remove a caveat?
There are several ways to remove a caveat, including the following:
- If a Transfer of Land is lodged with Land Victoria to transfer the property to the caveator, the caveat will automatically lapse so the property can be transferred (provided that the caveator and the transferee are identical)
- If the caveator does not commence legal proceedings within 30 days of Land Victoria's notice of a subsequent dealing as above, the caveat will automatically lapse so that a subsequent dealing can be registered
- The caveator or their legal representative can lodge a Withdrawal of Caveat form with Land Victoria with the prescribed fee (note that a purchaser's mortgagee will often require a Withdrawal of Caveat at settlement, especially when the purchaser has placed a caveat and then nominated an alternative transferee)
- The registered proprietor or another person with an interest in the property can apply to the Registrar of Titles under Section 89A of the Transfer of Land Act 1958 so that a notice will then be served on the caveator requiring them to substantiate the caveat within 30 days or less, failing which the caveat will lapse
- A person adversely affected by a caveat can apply to the Supreme Court for removal of the caveat under section 90(3) of the Act.
A caveat which lapses or has been removed cannot be renewed by the same person in respect of the same interest. Furthermore, if the caveator loses their grounds for claiming an interest in the property (e.g. on rescission of a Contract of Sale), the caveat will no longer be effective and may be removed.
Many of the complex issues above also apply to withdrawing a caveat. You should engage a lawyer for advice on caveats and to ensure that a caveat is properly removed.
Tips for dealing with caveats
- Conduct a title search if you intend to deal with real estate so that you can identify any caveats already registered on Title
- Engage a lawyer for legal advice regarding caveats and to assist with lodging or removing caveats
- Do not delay lodging your caveat because priority will be given to any dealing with the property which is lodged at Land Victoria before your caveat
- Beware that a caveat will lapse if proceedings are not commenced by the caveator within 30 days of Land Victoria's notice to them of a subsequent dealing.
How can Sharrock Pitman Legal help?
We are Accredited Property Law Specialists, having extensive experience and expertise in assisting customers with their property matters. If you need advice, please contact us and it would be our pleasure to assist. Call Sharrock Pitman Legal today on 1300 205 506.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
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Andre is a Principal of Sharrock Pitman Legal.
He heads our Property Law Group and is an Accredited Specialist in Property Law (accredited by the Law Institute of Victoria). He also deals with Commercial Law. For further information, contact Andre Ong on his direct line (03) 8561 3317.