Caveats – do they work and how they can work for you?

There may come a time when you will need to take steps to protect your interest over property. It is not possible to simply lodge a caveat over a property.

There may come a time when you will need to take steps to protect your interest over property. It is not possible to simply lodge a caveat over a property. An interest in the land must be established. The question of whether someone has an interest in land is not always straight-forward and one which legal advice should be sought on before lodging a caveat over property. Here is a brief synopsis of the effect and operation of a caveat:

What is a caveat?
The word “caveat” means beware. The lodging of a caveat over property is a written warning to anyone who checks the Certificate of Title to the property that the person who lodged the caveat (“the caveator”) has an estate or interest in land.

Who can lodge a caveat?
Under Victorian law and pursuant to section 61 of the Transfer of Land Act 1958, any person has a right to lodge a caveat. Legal advice should be obtained beforehand to establish (i) whether a caveatable interest exists, (ii) whether there are any contractual prohibitions on the lodging of a caveat and (iii) whether further registrations to be made on the caveator’s behalf may be affected.

When should a caveat be lodged?
A caveat should be lodged as soon as a caveatable interest is established. If a caveat is not lodged immediately, there is a risk that another party may attempt to register an interest in the property.

What effect does a caveat have on land?
The lodging of a caveat does not create any priority in the interest noted in the caveat. The purpose of a caveat is to notify the Registrar of a claim and to enable the giving of notice to the caveator of any dealing. The lodging of a caveat protects the interest claimed by the caveator to the extent that it prevents further dealings without notice. A property cannot be sold unless the caveat has been removed.

What are the risks if a caveat is lodged improperly?
If a caveat is lodged without reasonable cause, the caveator may be liable for any loss caused by the caveat. Section 118 of the Transfer of Land Act 1958 states:
“Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make any person who sustains damage thereby such compensation as the Court deems just and orders.”

Removal of a caveat
The Transfer of Land Act 1958 provides three different methods by which application may be made for the removal of a caveat:

  • by the Registrar issuing a notice requesting the caveator either to give notice abandoning the claim or issuing proceedings to substantiate the claim (s89A);
  • by a person lodging a dealing on the title and 30 days have passed since the registrar gave notice to the caveator that the caveat will lapse (s90(1)); or
  • by application to the Court to have the caveat removed (s90(3)).

If you are interested in obtaining more advice as to whether you can lodge a caveat or getting a caveat put on a property to protect your interests, please contact our property specialists, Simon Exley and Aaron Chan today on 9863 7621, or email directly.

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