We are often asked by clients whether they can lodge a caveat. The prospect of a caveat being lodged over your property can be quite intimidating.
Caveats can be an excellent tool to apply pressure in a legal fight or secure payment of monies. But there are rules as to who can and can't lodge a Caveat. If you wrongly lodge a caveat you can be liable for damages.
In this article John Warlow breaks down what a Caveat is, when you can lodge one, and whether you should be concerned by the prospect of a Caveat.
What is a Caveat?
A Caveat is an encumbrance which is registered over the title to a property. A person who lodges a Caveat over a property is called a 'caveator'.
What does a Caveat do?
A Caveat will stop most (but not all) dealings with the title to a property. For example, a Caveat will stop an owner selling the property or registering a mortgage over the property.
Importantly, a Caveat won't in and of itself give a person a right to sell a property or use a property.
By comparison, a mortgage will usually give the mortgagee the right to sell the property if the mortgage is in default. Similarly, an easement will often give a person a right to use part of a property in some way.
A Caveat won't automatically give such rights. All a Caveat usually does is stop dealings with the title to a property.
When can a person lodge a Caveat?
Section 122 of the Land Title Act says that to lodge a Caveat a person must have a sufficient "interest in a lot". In other words, to lodge a Caveat you must have what the law considers to be a sufficient interest in land.
There are dozens and dozens of cases where courts have adjudicated on what is, and isn't, a sufficient interest in land to lodge a Caveat. In simple terms, to lodge a Caveat you must have some type of legal right over the property, or a charge over the land.
Examples of when you can lodge a Caveat
Here are some examples of when you can lodge a Caveat.
- A Caveat can be lodged if you have a valid charge over the land. Inserting a clause in your written credit agreement or contract of engagement which charges particular land can give you a right to lodge a Caveat – but the document must be signed and the clause must be carefully worded to satisfy all the requirements laid down by the courts.
- A person who has a contract on foot to purchase a property can usually lodge a Caveat over the property.
- A builder can sometimes lodge a Caveat to secure moneys owing in respect of a building they have constructed on the land. But note that under the QBCC Act a builder cannot lodge a Caveat if they are building a residence for an owner-occupier.
- A person who has contributed money to the purchase of a property, but isn't registered as an owner on the title, can sometimes lodge a Caveat if a trust has arisen in the eyes of the law.
Examples of when you can't lodge a Caveat
Here are some examples of when you can't lodge a Caveat.
- A mere debt owing by a property owner won't give you the right to lodge a Caveat over their property. To lodge a Caveat you need to have an actual interest in their property such as a charge over the land in a written contract.
- A Caveat cannot usually be lodged to secure the refund of a deposit which is repayable under a terminated contract.
- A purchaser under an 'off the plan' contract does not have a sufficient interest to support lodging a Caveat.
How do I get a Caveat off my title?
There are usually 4 ways to remove a Caveat from your title.
- 14 day notice. Under section 126 of the Land Title Act you can give the person who lodged the Caveat a notice requiring them to commence court action against you within 14 days seeking a order which confirms their right to lodge the Caveat. If they don't commence court action within 14 days, you can have the Caveat removed. But be aware that giving this 14 day notice could bring on court action against you.
- Wait 3 months. In Queensland, a Caveat will lapse 3 months after it is lodged unless the person who lodged the Caveat commences court action seeking a court order which confirms their right to lodge the Caveat. Consequently, if you don't need to deal with the title to your property, a good option is often to wait and see if the caveator commences court action within 3 months.
- Apply to court. A court has the power to remove a Caveat if the judge is satisfied that the caveator doesn't have a sufficient interest in the land to entitle them to lodge a caveat. A court can also remove a Caveat if the judge is satisfied that prejudice the landowner is suffering as a result of the Caveat, is greater than then the prejudice the caveator will suffer if the Caveat is removed. To persuade a judge of this the landowner will often need to pay the monetary amount in dispute into court.
- Negotiate an agreement. You can negotiate an agreement with the caveator by which they agree to remove the Caveat.
Should I be concerned about a Caveat?
If you plan to deal with the title to your property in the near future – for example if you plan to sell the property or want to borrow money based on a mortgage over the property – then yes you should be concerned about the prospect of a Caveat as it will likely stop you selling or mortgaging the land.
How can I use a Caveat to get paid?
As covered above, the prospect of a Caveat being lodged can be quite intimidating to some people. A Caveat can also prevent a person selling or mortgaging their land.
Consequently, a Caveat can be an excellent tool to apply pressure in a legal fight or secure payment of monies. But you first need to have the right to lodge a Caveat.
Clauses can be inserted in many types of contracts which create a charge over particular land and give you the right to lodge the Caveat if the other party breaches the contract. We have found such clauses to be quite effective, particularly given lodging a Caveat is relatively inexpensive.
Typically lodging a Caveat involves legal fees of around $1,000 plus the Titles Office fees of about $250. But keep in mind that by lodging a Caveat you could be throwing the first punch in what could escalate into a bigger and more costly legal fight.
Some other important points
The are a couple of other important points to bear in mind.
- Lodging a Caveat when you do not have a sufficient interest in land can leave you liable for damages. Those damages could be substantial if your Caveat thwarts a sale of the property or a finance transaction. Consequently, before lodging a Caveat, your legal advisers need to carefully consider whether or not you do indeed have sufficient grounds to lodge the Caveat.
- You can't lodge a second Caveat on the same grounds. Consequently, if your Caveat lapses after 3 months, you can't lodge a new Caveat on the same grounds.
One final Caveat (pun intended)
Finally, keep in mind that this article contains general information which might not apply in your particular situation. The principles referred to above are the general rule, but like many aspects of the law, there can be exceptions.
For example, in some situations a person who lodged a Caveat might have the right to forcibly sell a property. There are also situations where a Caveat may not stop a person selling a property – for example a Caveat lodged to secure money might not stop a mortgagee selling a property.
Lodging a Caveat also brings with it the risk of escalating the dispute and the possibility of court action. Consequently it is important to obtain experienced legal advice if you are considering lodging a Caveat, or if you are concerned about a Caveat being lodged over your property.
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.