What are caveats?
Caveats can often be the most effective means of protecting legitimate proprietary interests to land as they have the effect of placing a “freeze” on a certificate of title by preventing anyone from dealing with the title to the land until the subject of the caveat has been resolved.
Caveats operate as a statutory injunction against dealings affecting the title to a parcel of land. The “freezing” effect of a caveat enables the caveator (the person lodging the caveat) to pursue such remedies as may be available against the owner of the land and prevents the registered proprietor (owner of the land) from lodging any dealing in relation to that land including the sale of that land.
The caveat acts as a warning to persons searching the Land Title register of the existence of the caveatable interest and ensures that, if a dealing involving the land is lodged, the caveator will be notified, giving the caveator the opportunity to assert their interest by way of Court proceedings.
When Can I Use Caveats?
Not all claims have a sufficient connection to a parcel of land to be capable of supporting a caveat or to amount to what is called a “caveatable interest” in that parcel of land. For example, a mere debt owed by a landowner is not sufficiently connected to the land to support a caveat, whereas a purchaser under a contract to purchase the land that has not yet been completed holds a caveatable interest in the land, unless prohibited under the terms of the contract.
The question as to the existence of a caveatable interest is one of the most frequently litigated issues in the area of property law. Generally, for a person to have a caveatable interest, the person must, at the time of the lodgement of a caveat, have a legally recognised estate or interest in the land to which the caveat purports to apply.
Examples of a caveatable interest in Western Australia include:
- a right to become the owner of land pursuant to a Contract of Sale as purchaser;
- the grantee of an easement;
- a mortgagee;
- an equitable mortgagee;
- a lessee under a lease of land;
- the beneficiary of a trust, against land held by a trustee for the trust;
- a person who is to receive a portion of the proceeds of land upon a sale; and
- the holder of an unregistered (but registrable) instrument.
What if I Get It Wrong?
It is very important to understand that lodging a caveat against the title to that land does not support a caveatable interest may give rise to significant compensation being payable to any person who suffers loss as a result. For example, if the caveat that does not support a caveatable interest causes a bona fide sale of that land to be terminated by the purchaser (as the vendor cannot transfer clear title), then any loss the vendor suffers may be claimed from the caveator. Such loss could include a loss on the resale of the land if the market had moved downward and the sale price achievable for the land had reduced.
If a party’s interest is prejudiced simply because a caveat was not lodged, or if it is incorrectly worded, it can have the effect of giving the party relying on the lodgement of the caveat a claim against the person who delayed lodging the caveat or who incorrectly prepared the caveat.
For example, in a situation regarding the sale of land, if a purchaser fails to lodge a caveat, that failure may constitute postponing conduct (i.e. the purchaser’s interest) as it allows subsequent interests to be registered or created without notice of the purchaser’s interest. The risk for the person preparing the caveat, or who failed to lodge it, is that a Court may find that they acted negligently thereby exposing that person to a claim for potentially significant compensation.
DIY Caveats?
Is it possible to prepare and lodge your own caveat? The answer is yes, but it is not recommended.
Preparing your own caveat can be risky especially if you are not familiar with the legal jargon or what constitutes a caveatable interest. If your caveat is not properly prepared, it could be found to be invalid by the Court, resulting in it being of no effect. This could mean that you will not be notified of any legal proceedings related to the property, which could prove very costly.
What Should I Do?
Leave the preparation and lodgement of any caveat to a lawyer. They understand the process and can ensure the document preparation and lodgement is correct to make sure that your rights are protected. Importantly a lawyer will advise if you have a caveatable interest in the land in the first place. The investment in having a lawyer advise you and prepare your caveat will ensure that you are not taking any unnecessary risks.
For more advice on caveats, please Contact Bowen Buchbinder Vilensky to book a consultation with our experienced Solicitors.
