Attwood Marshall Lawyers Commercial Litigation Senior Associate Georgia Taylor looks at the intricate landscape of caveats and explains what agents should do if they find a caveat on a property’s title during the listing process.
Real estate agents play a crucial role in facilitating property transactions. However, they may occasionally encounter unexpected roadblocks, including when a caveat is registered over the title of the property they’ve been entrusted to sell.
What should you do if you find a caveat on the title of the property during the listing process?
Here, we discuss the importance of dealing with the discovery of a caveat early on, ideally before listing a property or signing a contract.
What is a caveat?
A caveat is a registration of an interest in real property (land). Derived from Latin, meaning “beware”. A caveat acts as a warning to potential buyers or other persons making enquiries on a property, that someone else besides the registered owner may have a claim for an interest in the land. A registered owner can also register their own caveat to prevent the property being dealt with.
Registered through the relevant state or territories’ land registry or titles office, a caveat will stipulate the person or entity that is claiming an interest in the property. It will also state the sum or value of that interest (i.e. claim for the whole, part or monetary sum) and how that interest is is allegedly derived.
Of course, a person cannot lodge a caveat over someone else’s land unless they have the appropriate grounds to do so. A person must have a claim in equity over the property, a charge over the property or other form of legal interest to make the registration of a caveat valid. The grounds for a caveat should be set out in the Titles Office caveat form. The registered owner/s will be notified and receive a copy of the caveat on registration.
How caveats can affect property transactions
It is often the case that a registered owner won’t find out about a caveat over their property until they try to sell it. An agent or lawyer engaged to assist in the transaction will usually be the first to discover any caveat after ordering a title search of the property.
Depending on the prohibited actions stipulated on the caveat once registered, you will typically find that a caveat will prevent the registered owner from “dealing” with the property in any way until the caveat is removed. A “dealing” includes a legal transfer of ownership of a property, or further encumbering a property with a mortgage.
When a property is being sold, any caveat/s registered on title must be dealt with before or on settlement, because a caveat will prevent the title of the property being transferred from the seller to the purchaser.
If not discovered and dealt with quickly and by experienced lawyers, caveats can lead to urgent and costly litigation.
How to recognise and verify a caveat
In the first instance, an agent should conduct a title search before entering into their agency agreement. On the title search, the registered owner/s names will be evident as well as any other registrations on the title. Along with easement, lease and mortgage registrations, you may notice a “CAVEAT” is registered along with the name of the caveator.
If you discover a caveat, you should call the seller and ask if they have knowledge of the caveat and if they have a solicitor involved. This is important as a caveat may relate to an ongoing dispute and an agent might be able to work with the solicitor to have the caveat removed before listing the property for sale.
If a seller has a solicitor dealing with the caveat already, an agent can receive a brief about the dispute relating to the caveat and satisfy themselves that the property can be prepared for sale, allowing them to make informed representations to any potential buyers.
If the seller is not aware of the caveat, they should be immediately referred for legal advice as soon as possible if they want to proceed with a sale.
A legal practitioner will be able to review the caveat and provide the following advice prior to listing the property for sale:
- Is the caveat valid? Is there a proper interest in the property asserted by the caveator which amounts to a caveatable interest? Without a valid caveatable interest, the caveat ought to be removed by the caveator. This can be facilitated with assistance from a solicitor prior to settlement.
- Has the caveat lapsed? Depending on the state or territory you’re in, legal proceedings may have needed to be commenced within a specified timeframe to maintain the caveat on the title. If that deadline has passed, the caveat may be removed with a simple form.
- Is the caveat going to be easy to remove? Your seller might know how to have the caveat removed, for example, by paying a debt to the person who lodged the caveat.
Legal processes available (and how a lawyer can help)
Depending on the type of interest that is asserted on the caveat and the timing for the sale of the property, there are several options available for removing the caveat that range from lodging forms with the applicable registry to commencing urgent proceedings in the Supreme Court of the applicable State or Territory to have the caveat removed.
An experienced practitioner will be able to provide advice on the simplest and most cost-effective option available.
Generally, the process for dealing with a caveat is simple if it is discovered before a contract is signed. The listing process can also be planned around its removal.
However, a caveat could also be registered on a title after a property is listed or already under contract. If this is the case, it is vital that the agent and a solicitor work to remove the caveat quickly and efficiently, so that the seller does not find themselves in breach of contract for not completing the contract, or worse, so that the sale does not fall through.
Even at these critical stages, the Courts can also order a caveat’s removal or facilitate a sale, preserving the caveator’s interest by making orders regarding the holding of proceeds of sale.
Recent Cases
We have recently assisted several clients who have had caveats registered on the title of their property or were themselves the caveators and needed assistance protecting their interest, including:
- Helping a client to obtain urgent orders in the Supreme Court of Queensland to remove a caveat that was registered after the contract was signed. We obtained the orders within five business days, and won a costs order against the caveator.
- Negotiating a withdrawal of a caveat that was pending the outcome of litigation by having specific proceeds paid into Court.
- Successfully lapsed (removed) a caveat registered in the 1980s that had remained unidentified on title and was only discovered during the estate administration process.
Attwood Marshall Lawyers – taking the stress out of buying and selling property
Our goal is to equip you with the knowledge and tools you need to navigate any hurdles that arise during a property transaction.
We are available to provide advice on contracts, searches, and disclosure if you or your clients have any questions or concerns.
For property and conveyancing advice, contact our team any time by calling Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, email jkimpton@attwoodmarshall.com.au, mobile 0432 857 300.
If you need advice about a property dispute or caveat, contact Commercial Litigation Department Manager, Amanda Heather, on direct line 5506 8245, mobile 0425 260 837, email aheather@attwoodmarshall.com.au or book an appointment online instantly with one of our commercial litigation lawyers.
Our lawyers are available at our Coolangatta, Kingscliff, Robina Town Centre, Southport, Brisbane, Sydney and Melbourne offices. Need assistance outside regular business hours? Our Robina Town Centre office is also open Thursday nights until 9pm and Saturday mornings until 12noon.
