Senior Associate Charles Lethbridge looks at the issues commonly associated with caveats in NSW.
What happens when a Caveat is lodged in NSW?
The registration of a caveat over the title of land acts as an injunction which prevents any further dealings taking place in relation to the land (for example, the sale of the land) without consent from the person who lodged the caveat. Caveats serve as red flags and a warning sign for potential purchasers of a property that someone else is claiming an interest in a property.
A caveat cannot be removed unless it is withdrawn (either by the person who lodged the caveat, or by order of the Court), or unless it is ‘lapsed’ by the owner of the property.
A caveat cannot be lodged without reasonable cause and the person lodging it must have a proper interest in the land. If someone improperly lodges a caveat without reasonable cause, they may be liable for damages and legal costs to the owner of the property if this prevents them from selling the property or causes loss through other means.
When can I lodge a caveat?
Most commonly people lodge caveats when someone owes them money. That is, if someone is owed money by another person who owns land, they may seek to lodge a caveat over that land to prevent the property being sold without their consent. However the fact that someone owes you money does not by itself allow you to lodge a caveat. In order to lodge a caveat you must have what is known as a “caveatable interest” in the land.
A caveatable interest means that you have a legal or equitable interest in land (i.e. real property). Caveatable interests can be created in a number of ways for example:-
- An agreement for the sale of goods or services may create a caveatable interest in favour of the seller if it contains a clause which creates a security or charge whereby the customer (the buyer) charges their real and personal property. This is similar to giving a mortgage over your property when you borrow money from the bank;
- Purchasers of a property under a contract for sale have a caveatable interest in the property they are buying that is a recognised equitable interest subject to them completing the contract; and
- A person may have a caveatable interest in a property because they are beneficially entitled to that property pursuant to a trust. For example, it may have been agreed that the legal owner of a property holds a property as trustee for a beneficiary in his or her name.
Attwood Marshall recently acted for a company who was owed a sum of money by a person it had sold marble pavers too. The buyer refused to pay for the pavers. In the agreement for the sale of the pavers there was a “charging clause” as discussed in example 1 above.
Pursuant to the charging clause the buyer had agreed to charge all of his property in favour of the seller to secure any outstanding money that was owed to the seller. This created a caveatable interest in favour of the seller. Attwood Marshall obtained a title search and discovered that the buyer owned real property. Accordingly, the seller instructed Attwood Marshall to lodge a caveat over the buyer’s property. The buyer wanted to sell his property however the seller would not release its caveat until the buyer agreed to have a cheque drawn from the settlement proceeds in favour of the seller.
How to remove a caveat
There are a number of ways that a caveat can be removed. The most common way is by a Lapsing Notice. A Lapsing Notice is issued by the owner of the property and then served on the person who has lodged the caveat.
The caveator (the person who lodged the caveat) has 21 days from the date of service of the Lapsing Notice to obtain an order from the Supreme Court of NSW for an order extending the operation of the caveat. If an order is granted, it must be lodged with the LPI (the titles office in NSW) before the 21 day period expires.
If no steps are taken by the caveator before the 21 days expires, the caveat will lapse (be removed from the title of the property).
Can you lodge more than one caveat for the same reason?
It is important that legal advice is sought if a caveat is lapsed because another caveat cannot be lodged on the same or similar grounds without leave of the Court. If you are an owner of property you should take action to remove the caveat. If you don’t, the interest claimed under the caveat remains on the title until the matter is resolved.
What to watch out for
If you enter into any supply or purchase contracts for goods be careful to read them carefully. There may be a ‘charging’ clause which can be linked to any real property you own. If you are unsure, get legal advice before you sign. It may save you a lot of money down the track!
Our dedicated commercial litigation team is able to assist you with any caveat enquiries in both Queensland and New South Wales. For further information, please contact our department manager, Amanda Heather, on (07) 5506 8245 or email email@example.com or free call 1800 621 071.
What Happens after a Caveat is lodged in Queensland? See more at: https://attwoodmarshall.com.au/what-happens-after-a-caveat-is-lodged-in-queensland/
We have an experienced dedicated Commercial Litigation team that practice exclusively in these areas.