If you have an estate or interest in land, and you wish to be able to protect that interest, in some circumstances consideration might be given to whether there is a caveatable interest. Examples of where estates and interests in land have been held sufficient to support a caveat include:-
- The interest of a purchaser under an agreement for the sale of land;
- An easement;
- An undertaking to execute a mortgage or an agreement to give a mortgage;
- The interest of a second mortgagee;
- A claim to an interest in the proceeds of sale of land held by a trustee on a trust for sale;
- A claim by a wife that land was purchased by her husband from money she had advanced for that purpose;
- The equitable right of a mortgagor to call for a transfer on repayment of a loan;
- The interest of a beneficiary under a trust;
- The interest of a purchaser under a conditional contract;
- A purchaser or vendors' lien;
- The interest of a unit holder in a unit trust;
- The right of a person to set aside a transaction procured through fraud or misrepresentation;
- A charge created by a building agreement, giving security for payments due under the agreement;
- The interest of a partner in partnership assets;
- The interest of a person arising from contributions which he or she has made to the purchase price;
- The interest of a person with a right to have the land sold and to have a portion of the proceeds of sale;
- The interest of a tenant under a lease or an agreement for lease.
Caveats are registered on title to a property so potential purchasers of the property are notified of the caveator's interest in that property. A caveat is a form of statutory injunction provided for under the Real Property Act 1900. When a caveat is lodged, it effectively prevents the Registrar General from registering any dealings (except for some statutory exceptions and any specifically permitted dealings) with the property that are inconsistent with those of the party who has lodged the caveat ("the caveator").
Statutory exceptions and permitted dealings aside, the Registrar General cannot register any dealings on a property on which a caveat has been lodged until:-
- the caveat is formally withdrawn by the caveator or his/her solicitor; or
- the caveat lapses because the interest claimed under the caveat is satisfied by the registration of another dealing;
- the caveat lapses after action taken following the lodgment of an application for preparation of lapsing notice; or
- the caveat is removed by an order of the Court; or
- the caveator consents, in writing, to the registration of the dealing.
Care should be taken when lodging a caveat. If a caveat is lodged improperly or without reasonable cause, the person lodging the caveat may become liable to pay compensation, damages to a person who suffers a loss as a result of the caveat being lodged.
Two decisions handed down in the Supreme Court of Victoria in September 2012 serve as a reminder to clients and lawyers of the consequences resulting from the improper lodgment of caveats.
- In the decision of Deutsch v Rodkin  VSC 450, the Judge found that the caveators had lodged a caveat over the subject property in order to punish the owner (and her husband) and prevent the sale of the subject property.The caveators appeared to be motivated by their belief that the husband had previously transferred the title to the property to his wife to avoid payment of a judgment debt. The Judge held that it was clear that the caveators had no caveatable interest in the property, that the caveats were lodged without reasonable cause and that the caveators were liable for damages made up of the following:-
- drop in value of the property due to a fall in the property market;
- the drop in value of the property caused by purchasers being deterred from buying the property because of the lodgment of the caveats;
- exemplary damages to punish the caveators for their abuse of the caveat procedure;
- legal fees; and
- costs of a cancelled auction.
- The decision in Pearl Lingerie Australia Pty Ltd v TGY Pty Ltd  VSC 451 serves as a reminder that lawyers also need to exercise care when lodging caveats on behalf of their clients. The Judge found that the caveator's lawyers had lodged a caveat on behalf of their client in circumstances where there was clearly no justification for claiming an equitable interest in the land. Further, the Judge found that the lawyers had not even seen the documents upon which their client's claim for an equitable interest was said to be based and this demonstrated that the lawyers had acted with wilful disregard of the facts and of the law which in turn amounted to serious misconduct. The Judge not only ordered the removal of the caveat from the property, but also ordered that the caveator's lawyers pay the costs of the proceedings on an indemnity basis and that a copy of the judgment be forwarded to the Victorian Legal Services Commission.
Legal advice should always be sought prior to lodging a caveat. If you improperly lodge a caveat, the potential costs consequences and damages that may be awarded against you can be significant. If you have questions regarding caveats or Commercial Litigation matters, please do not hesitate to contact our Commercial Litigation and Dispute Resolution team or Property Team.
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.