Property developers often require purchasers to agree to 'no
caveat' clauses and to grant powers of attorney in favour of
the developer, in order to assist the efficient running of
developments. However, the use of these mechanisms was recently
scrutinised by the New Zealand High Court in Nicholson v Morning
Star (St Lukes Garden Apartments) Limited  NZHC 599.
In the Morning Star case, the developer changed the plans for a
residential property development midway through the development. A
purchaser of one of the apartments objected to the changes and
lodged a caveat over the 'future development units' in the
In what were effectively preliminary proceedings (an application
to lapse the caveat), the Court had to consider:
The extent of the developer's contractual right to alter
The effect of a 'no caveat' clause.
Whether the purchaser had a beneficial interest over, and could
therefore caveat, the future development units.
Whether the developer could use a power of attorney granted by
the purchaser to remove the caveat.
The Court refused to lapse the caveat. Based on the facts
surrounding the case, the Court held that the proposed changes to
the development might exceed the developer's rights under the
sale and purchase agreement. Because of this, and because of the
specific wording of the 'no caveat' clause, the Court also
found that the caveat did not breach the 'no caveat'
Of particular interest however, was that the Court sustained the
caveat even though it was lodged over the title to the future
development units when the purchaser's apartment was outside
the future development units and comprised within an entirely
different certificate of title.
Also, the Court indicated a willingness to impose limitations on
a developer's use of a power of attorney (granted by a
purchaser). Particularly, where the developer may be using it to
prevent a purchaser from protecting their contractual rights.
In short, this case highlights that 'no caveat' clauses
and supporting powers of attorney are not completely reliable.
In addition, it serves as a reminder that when looking to make
changes to a property development, developers need to be mindful of
the limitations any pre-sales agreement might impose on those
Phillips Fox has changed its name to DLA Phillips Fox
because the firm entered into an exclusive alliance with DLA Piper,
one of the largest legal services organisations in the world. We
will retain our offices in every major commercial centre in
Australia and New Zealand, with no operational change to your
relationship with the firm. DLA Phillips Fox can now take your
business one step further − by connecting you to a global
network of legal experience, talent and knowledge.
This publication is intended as a first point of reference
and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).