Safeguard Your Slice of Paradise: Navigating Caveats and Real Estate
Owning property is a dream for many Australians, but the journey to securing your slice of paradise can be fraught with legal complexities. One such complexity is the caveat – a powerful tool that can either protect your interests or create roadblocks in real estate transactions. In this article, we’ll explore the world of caveats, their functions, and how they can impact your property aspirations in South Australia.
What is a caveat on property?
In Latin, the word ‘caveat’ translates to ‘let a person beware’. In property law, a caveat serves as a formal notice that someone (the caveator) claims an unregistered interest in a property. When a caveat is lodged on the Certificate of Title, it acts as a statutory injunction, preventing the registered proprietor from further dealings with the property, such as selling it, until the caveator’s claim is resolved or acknowledged.
A caveat on property is not an interest in the property itself, like a registered or unregistered mortgage. Instead, it is a warning that the caveator claims some type of interest in the land. This could be an equitable interest, such as a financial contribution to the property’s purchase or maintenance, or an unregistered mortgage. The person lodging the caveat must prove the validity of their interest, known as a caveatable interest.
Lodging a caveat can protect your interest in the land, but it also comes with responsibilities. If you lodge a caveat without reasonable cause, you may be liable to pay compensation. Therefore, it is crucial to seek legal advice before lodging a caveat to ensure you have a legitimate claim and understand the implications.
In South Australia, the Real Property Act governs the use of caveats. There are two main types of property caveats: absolute caveats, which prevent any subsequent dealings with the property, and permissive caveats, which allow further dealings subject to the caveator’s claim. If a caveat is lodged, it must be formally withdrawn or removed before any property sale can proceed.
Types of caveats
There are two types of property caveats:
- absolute caveat – this caveat will not allow any subsequent registrations of interests on the Certificate of Title of a property whatsoever; and
- permissive caveat – this caveat may allow further registrations on the Certificate of Title of a property if the registrations are made subject to the caveator’s claim. Permissive caveats may also require the caveator’s written consent for any further dealings.
The exception to the above is the registration of further caveats; other caveators claiming an interest in the same property may lodge their own caveat.
Who can lodge a caveat?
To lodge a caveat over the property the caveator must have a ‘caveatable interest’. A caveatable interest means the claimed interest ‘attaches’ to the property in some way.
The following are common scenarios that may give rise to a caveatable interest and permit the lodgement of a caveat:
- unregistered mortgages;
- unregistered leases;
- charge granted in favour of the caveator (typically seen in loan agreements);
- purchaser’s interest in a contract to purchase property;
- beneficiary under a will or trust; and
- where a person has contributed to the “acquisition, maintenance and improvement” of the property – this may be by either financial or non-financial contributions (e.g. where a couple purchase a property together but the title is in the name of one spouse only).
It is important to note that a debt itself does not give rise to a caveatable interest and so a caveat is not the appropriate remedy when only monies are owed.
Where a caveat is lodged unnecessarily, for instance if there is no caveatable interest, the caveator may be liable to pay compensation to the registered proprietor of a property where loss or damage is incurred.
How is a caveat lodged?
Caveats are lodged through Land Services SA. While a caveator may prepare and lodge a caveat themselves, it is imperative that professional advice is sought from a lawyer or conveyancer regarding caveats before proceeding. Not only will a lawyer or conveyancer ensure that the caveat is correctly completed but they can also provide important advice regarding the validity of the caveat and the consequences of lodging a caveat.
How long does a caveat last?
In South Australia, once a property caveat is lodged on the Certificate of Title, it remains in effect until it is formally withdrawn or removed. This means the caveat acts as a statutory injunction, preventing any further dealings with the property, such as a property sale or transfer, until the interest claimed by the caveator is resolved.
If the registered proprietor or any other party involved wishes to remove the caveat, they must either obtain the caveator’s consent or seek a court order. The Real Property Act 1886 governs this process, and if the caveator wants the caveat to remain, they must make an urgent application to the Supreme Court within 21 days of receiving a lapsing notice from the Registrar-General. Failure to do so will result in the caveat lapsing, allowing subsequent dealings with the property to proceed.
It’s crucial to seek legal advice before lodging a caveat to ensure you have a legitimate caveatable interest and to understand the potential implications, including the risk of financial loss if the caveat is deemed unjustified.
How is a caveat withdrawn, removed or extinguished?
Typically, caveats may either be ‘withdrawn’ or ‘removed’.
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Withdrawal of Caveat (by caveator)
The first (and simplest) way of dealing with a registered caveat is for the caveator, being the person who lodged the caveat, to withdraw the caveat themselves. This occurs in a similar way that the caveat was first lodged except the caveator applies to Land Services SA for the caveat to be withdrawn.
If the relationship between the registered proprietor and a caveator is amicable they may be able to come to an agreement with respect to the caveator’s claim and the caveator may subsequently withdraw the caveat. This is most often the simplest and most cost-effective way of dealing with a caveat.
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Removal of Caveat (by registered proprietor)
The second (and potentially more complicated) way of dealing with a caveat registered on the Certificate of Title of a property is for the registered proprietor of the property to apply to Land Services SA to have the caveat forcibly removed – this is known as ‘warning’ a caveat.
This is an available avenue when the relationship between the registered proprietor of a property and the caveator has broken down and they are unable to reach a resolution with respect to the caveator’s claim. If the registered proprietor objects to the caveat they may warn it.
A further example of when warning a caveat may be an appropriate means of potentially removing the caveat is if the caveator cannot be located and reasonable attempts have been made to do so.
When a caveat is warned by the registered proprietor, Land Services SA will notify the caveator that at the end of 21 days after the warning the caveat will be removed. If the caveator would like the caveat to remain registered, they must make an application to the Supreme Court within the 21-day period.
An application to the Court by the caveator is a Court proceeding. As part of the Court application the burden is on the caveator to persuade the Court that there is an arguable case to keep the caveat registered on the Certificate of Title of the property. At the conclusion of this proceeding, the Court will either order for the caveat to be removed (if the caveator does not have a valid claim) or for the caveat to be extended and remain registered until the caveator and registered proprietor resolve the claim (resolving the claim may involve further and separate Court proceedings).
An application to the Court typically involves significant time and costs. As such, it is very important to seek legal advice from a lawyer before taking any steps to warn a caveat.
Can a further caveat be lodged?
A caveator cannot lodge a caveat on the Certificate of Title of the same property for the same interest more than once.
What to do if you have to deal with a caveat?
Dealing with caveats can be complicated and can have costly consequences if not dealt with correctly. Legal advice should be sought as soon as possible if you have any queries or disputes relating to a caveat.
Eckermann Lawyers is a property and commercial law firm that specialises in dealing with caveats. If you would like more information or advice on how best to deal with a caveat, please contact Eckermann Lawyers at (08) 8366 7900 or via email to enquiries@eckermannlawyers.com.au.
