Caveats

In New South Wales the Torrens Title System applies to real property. The Torrens Title system is essentially a system of “title by registration” as opposed to a system of “registration of title”. Thus registering any interest in land is fundamental to enforcing that interest.

However, not all interests are immediately registrable, for a variety of reasons.

The Real Property Act, which governs registration of title, provides a mechanism for lodging a “caveat” on title. For the public, a caveat serves as a warning to any persons searching the register of titles that the caveator (the person who lodged the caveat) has, or claims, an interest in the land. The caveat should set out succinctly but clearly what that interest is.

In addition to providing a warning, a caveat also has the effect of an injunction by preventing any dealings taking place regarding that title unless the caveator consents or the caveat is removed.

This powerful injunctive capacity has lead to caveats becoming both misunderstood and misused.

Contrary to popular practice, persons cannot simply agree to permit a bare caveat to be lodged. A caveat needs to be based on an interest in the land – whether a charge, a beneficial interest or other. A common example of this is when parties agree to provide land as security for a debt and purport to consent to a caveat to be lodged. A bare caveat is ineffective. It provides no positive rights (ie, no right of sale) and is liable to be removed upon the issuing of a lapsing notice. In such a case a charge needs to be given, to be the founding interest for a caveat.

If a caveat is lodged without reasonable basis, the caveator may be liable to compensate for any loss arising from the improper lodging of the caveat.

If a lapsing notice is issued a caveator must take prompt action to extend the operation of the caveat. This can only be done by way of an order of the Supreme Court and must be done very quickly (the order must be obtained within 21 days of service of the lapsing notice). As such, a caveator must be prepared to set out its interest in the land to the court at short notice. 

To do this, both the interest in the land must be asserted and the caveator, in order to keep the caveat on title, must proceed to run its case seeking substantive relief. For example, in a case where a creditor has taken a charge over land as security for a debt, that creditor must show a caveatable interest – the charge (including the payment of stamp duty) – and must commence proceedings to recover the debt and enforce the charge.

Prime Lawyers has considerable experience in the use of caveats, ranging from drafting appropriate contractual terms to form a proper basis for the lodging of a caveat, to drafting and lodging caveats, to undertaking urgent Supreme Court proceedings to obtain orders extending the operation of caveats after lapsing notices have been served. We can act quickly to lodge, lapse and extend caveats the subject of a dispute. 

If you require legal advice concerning a caveat then get in touch with our litigation lawyers by contacting your local Prime Lawyers office. 

We have debt recovery and litigation lawyers located in Sydney, Parramatta, Chatswood, Sutherland and Wollongong.