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Some caveats registered on the title to real property can create
obstacles to the conveyancing process in a mortgagee power of sale,
even if the caveat is registered subsequent to the mortgage under
which the mortgagee is exercising its power of sale.
Generally, a caveat freezes the Register, preserving the status
quo.
While a caveat remains in force, the Registrar General cannot
record in the Register any dealing prohibited by the caveat, except
with the caveator's consent. However this general prohibition
is subject to exceptions, for example:
a caveat does not prohibit the Registrar General from
registering a transfer under power of sale in relation to a
mortgage recorded or lodged before the lodgement of the caveat;
and
the Registrar General shall, for the purpose of the sale under
power of sale, register a transfer executed by a mortgagee and,
upon that registration, the estate or interest of the mortgagor of
the land comprised in the transfer shall pass to and be vested in
the transferee, freed and discharged from all liability on account
of the mortgage or of any mortgage subsequently registered.
Normally, the Registrar General will register a transfer under
power of sale and record that the caveat is cancelled, where:
the caveat is by an unregistered mortgagee; and
the caveat does not expressly prohibit the registration of the
transfer and either:
the caveat was recorded after the mortgage conferring the power
of sale; or
the caveator had consented to the recording of the mortgage or
had allowed the caveat to lapse in respect of the recording of the
mortgage.
However, a caveat that does not fit into the criteria above will
not be cancelled by the Registrar General when and if a transfer
under power of sale is lodged for registration.
Examples of caveats that do not fit into the criteria above
include a caveat registered by a grantee under an option or a
caveat registered by a purchaser under a contract for sale.
Accordingly, if a secured property the subject of a mortgagee
sale has noted on the title a caveat securing an option granted to
a third party grantee, the mortgagee will have to either:
negotiate a withdrawal of caveat from the caveator; or
attempt to lapse the caveat,
as the Registrar General will not cancel the caveat upon
lodgement of a transfer under power of sale.
If a purchaser of the secured property is aware of this
likelihood, they will insist on the mortgagee providing a
withdrawal of the caveat signed by the caveator as a condition of
settlement of the contract. This will create an additional burden
on the mortgagee exercising its power of sale.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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