8 September 2018

Caveats Series – Part 2: Can I lodge a caveat?

Any individual or body corporate can lodge a caveat over a specific property, but you must have a caveatable interest.
Australia Real Estate and Construction
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Any individual or body corporate can lodge a caveat over a specific property, however, in order to be able to lodge a caveat it is essential that you have a caveatable interest. Without a caveatable interest, your caveat is unlikely to survive scrutiny by a Court and that may have consequences.

That then begs the question, what is a caveatable interest and more importantly, what is not?

What is a caveatable interest?

Caveatable interests come in many forms but the prevailing theme is that in order for a caveatable interest to exist, the caveator must have some current legal or equitable interest in the land.

Some common examples of caveatable interests are as follows:

  • a purchaser under a contract for sale;
  • a party who has been given a charge over the land as security for the performance of any obligation;
  • the beneficiary of a unit trust;
  • a party that performs works or contributes towards a property with the view to taking some form of ownership of the property;
  • a lessee under a lease; and
  • a holder of an option to purchase property.

When lodging the caveat, it is critical that the basis for the caveat and the supporting documentation/statutory declaration adequately describe the caveatable interest. Any error in describing the caveat can render your caveat unenforceable notwithstanding that the underlying reasoning behind the caveat may have merit. Getting these fundamental aspects of your caveat right at the outset can save you a lot of time and heartache further down the track.

What is not a caveatable interest?

It is also just as important to know what sorts of common claims do not support the lodgement of a caveat. Some of the more common interests that we often get asked about which cannot support the registration of a caveat are as follows:

  • A creditor does not have a caveatable interest. Caveats are not enforcement tools which can be relied upon just because someone owes you money.
  • Builders or tradesman that perform work on a property cannot lodge a caveat as the performance of works, even if there is some form of a retention of title clause in the contract, does not by itself give rise to any interest in the land (we note that most building contracts do have a charging clause which can be relied on to lodge a caveat but it is important to check).
  • A beneficiary under a discretionary trust. This is because a beneficiary does not have any specific interest in any particular part of any trust property.

What happens if I lodge a baseless caveat?

Although Landgate may accept a caveat, Landgate does not determine if there is a proper caveatable interest. If any improper caveat is registered the landowner can apply to have the caveat removed and you may be required to take court action to prove your caveatable interest.

If the Court finds that your caveat is baseless there consequences can be severe.

The initial risk is that if the Court orders that your caveat be removed or refuses to extend your caveat it is likely that you will be ordered to pay the legal costs of the other party, which could be significant.

If that isn't enough, s140 of the Transfer of Land Act 1893 (WA) gives anyone adversely affected by the lodgement of a caveat the ability to seek compensation. For instance, in the case of Westpoint Corporation Pty Ltd v Registrar of Titles & Anor [2005] WASC 273, the registered proprietor was awarded $250,216.99 in compensation due to settlement being delayed on account of a baseless caveat.

Key points to remember

You should never assume that a caveat can be lodged for any reason. If, for example, you intend to loan money or extend credit, it is important to ensure from the very outset that any loan agreement between the parties include a charging clause creating a caveatable interest, the absence of which may mean that your loan is not properly secured.

However, it is important to remember that although your caveat may be accepted by Landgate, the underlying interest may not stand up in the face of scrutiny by the courts. Thus forms our next article in this series Part 3: How do I remove a caveat? which addresses how you can remove a caveat and how your caveat can be removed.

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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