What If There Is A Caveat On My Property?
Written by: Nancy Robertson | Legal Team
A caveat on a property is a notice or a warning that someone claims an interest in the land, even if they are not the legal owner. The caveat is lodged against the property’s title and serves as a legal restraint until the person’s interest is determined. After a caveat has been lodged it will appear on the property’s title, giving prospective buyers notice that a third party might have rights over the property.
What Does It Mean To Put A Caveat On A Property?
Putting a caveat on another person’s property means that you are lodging a legal restraint over the title in the belief that you have a proper legal basis to do so.
The caveat will remain on the title until it is (a) withdrawn by the creator, or (b) removed by way of a Section 89A Lapsing Notices. The only other avenue is for the property owner to forcibly remove the caveat by way of a Section 90(3) application.
Section 89A Lapsing Notices is a cost-effective method for removing a caveat in Victoria.
An application is made by the registered proprietor to the Registrar of Titles, supported by a solicitor’s certificate, to say that the caveator does not hold the interest that is currently the subject of the caveat. The Registrar of Title will send a notice to the caveator notifying them of the application and giving them a specified period (no less than 30 days) to respond.
Upon receiving this notice, the caveator either ignores it, in which case the caveat will lapse, or they can issue court proceedings to substantiate their ‘caveatable’ interest.
Section 90(3) Application is an urgent application made in the Supreme Court in the event the caveat is impending a settlement that could cause a purchaser to walk away, and it is up to the caveator to bear the burden of showing that his or her caveat is justifiable.
Property Law: Can You Sell a Property With a Caveat On It?
Once a caveat has been registered over a person’s property, if any other party tries to register a dealing that affects that title, the Land Titles Office will notify the caveator of the proposed dealing, which then in turn gives the caveator an opportunity to take action, i.e. if the property has been sold or is being transferred.
It is often the case that, where there is a genuine basis for the caveat on the property, the caveat is removed simultaneously with any sale. The solicitor or conveyancer acting for the vendor would direct that the caveator receive their financial interest in the property (for example, repayment of a loan) at the time of settlement.
A caveat does not prevent the legal owner from dealing with the property in any way, such as refinancing. However, third parties are less likely to accept the property as security until the caveat has been removed from the title, despite the fact that the bank’s interest overrides, to some context, the interest of the caveator.
Legal Issues: What Are The Risks Of A Caveat?
To have a caveat removed from your property, you will need to liaise with the Caveator to try to resolve whatever the issue was that led to the caveat being lodged.
If an agreement cannot be reached between the parties, it may be necessary to consult a solicitor to attempt to negotiate a resolution to the matter. If the solicitors reach a resolution, the solicitor would request that the caveator arrange for the lodging of a Withdrawal of Caveat through either their conveyancer or a property lawyer who is a subscriber to the Property Exchange Ltd (PEXA).
If there is no resolution of the underlying issues with the Caveator, the solicitor would need to apply to a court or tribunal who could order the removal of the caveat.
Family Law Caveats
In family law, couples who have purchased property together during their relationship but only one of them is registered on title, are often advised that a caveat should be registered on title to protect their ownership and rights pending the finalisation of their family law property settlement.
A caveat can only be used when there is a proper legal basis, and you cannot register a caveat on another person’s property as leverage in family law negotiations. If the owner of the property challenges the caveat you must be able to produce to the Land Titles Office sufficient evidence to prove that you have a legal basis in which to do so.
Once a settlement has been reached between the parties, and either a financial agreement or court orders have been put in place, it is then removed, either upon a transfer of the subject property from one party to the other or if the property is to be sold, then at settlement.
If a person believes they have a proper legal basis on which to lodge a caveat, for example, they are a family member (e.g. sibling, etc.) and made a contribution (like payment of the deposit) towards the purchase of a property or contributed funds towards payment of a mortgage on the property to assist their family member and not received any reimbursement they may lodge a caveat to protect their interest in the property.
Canny Legal, Property Law + Your Conveyancing Needs
If used properly, caveats can provide protection to third parties who have invested a financial interest or other interests in either the property or the property owner. There is a small chance of abuse, but overall caveats are valuable tools.
Canny Legal has the expertise to guide you through every step of the conveyancing process and regularly collaborates with our accounting and advisory team to ensure that all aspects of your transaction are considered. This often includes; planning for tax and stamp duty implications, capital gains tax, structure considerations and also investment advice.
Get in touch with our team if you are preparing for the sale or purchase of a property so we can assist.
