The word caveat simply means “let him beware”!
An unregistered interest in a lot may need protection when it comes to matters such as transfers of title, mortgages, and subdivision.
A common way in protected these interests is through the lodgement of a caveat.
A caveat is a legal document which prevents the registration of any dealings which may defeat the interest claimed upon lodgement.
The Land Title Act 1994 (the ‘LTA’) is the primary act covering caveats in Queensland which may be referred to regarding any issues and requirements.
As a note for terminology, the party who lodges a caveat is known as a ‘caveator’ and the party who has an interest in the land over which the caveat is lodged, is called the ‘caveatee’.
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What is the effect of lodging a caveat?
They key effect in lodging a caveat on a property, is the prevention of the legal owner or any third party in transferring or selling the property to another person, or registering other instruments against the property (such as mortgages).
As stated in the case of Leros Pty Ltd v Terara Pty Ltd [1992] HCA 22 at paragraph 422, the purpose of a caveat is to:
“Operate as an injunction to the Registrar-General to prevent registration of dealings forbidden by the Caveat until notice is given to the Caveator, so that he or she has an opportunity to oppose such registration”
A caveat however does not prevent a number of exceptions as found under s 124(2) of the LTA, such as:
- an instrument specified in the caveat, as one to which the caveat does not apply,
- an instrument, if the caveator consents to its registration,
- an instrument executed by a mortgagee whose interest was registered before lodgement of the caveat (requirements apply);
- an instrument of transfer of mortgage executed by a mortgagee whose interest was registered before lodgement of the caveat; and
- another interest that, if registered, will not affect the interest claimed by the caveator.’
The Land Titles Office will assess the caveat to ensure all the requirements under the LTA are met.
The caveat will be requisitioned if it does not include all the required information.
The Titles Office, however, will not decide if the caveator holds a “caveatable interest”, this will be a determination for the Courts.
Who is eligible to lodge a caveat over a property?
Under the LTA section 122(1), a caveat may be lodged by number of people, including a person claiming an interest in the land, the Registrar at the Land Titles Office, or the register proprietor of the land.
A caveat may also be lodged under alternative sections and acts such as section 104 regarding adverse possession application, section 114 regarding a Supreme Court order, and under the Property Law Act 1974 (the ‘PLA’).
In regard to a person claiming an interest in the land, a ‘caveatable interest’ will be required to be an actual interest in the land. A mere personal or contractual right is insufficient, as seen in Queensland Estates Pty Ltd v Collas, which set the precedent disallowing a right to caveat arising from a contractual right.
Other cases where the court has not found a caveatable interest on behalf of the caveator are:
- A shareholder’s interest in a company (Apartment Developments Pty Ltd v Johnson [2013] VSC 136).
- A beneficiary’s interest under a discretionary trust (Walter v Registrar of Titles [2003] VSCA 122).
- A partner’s interest in a partnership (Chettle v Brown [1993] 2 Qd R 604).
Schedule 1 of the Acts Interpretation Act 1954 defines an interest in regard to land or property as ‘a legal or equitable estate in the land or other property, or a right, power or privilege over, or in relation to, the land or other property.’ This may include a registered or unregistered interest such as a lease.
What is the process after it has been lodged?
A caveat lodged with the Land Titles Office will lapse after 3 months if no proceedings are commenced within that time frame.
However, under section 126(1) of the LTA, a caveat will remain in place after the 3 months if there is consent by the registered owner when it was lodged, a copy of the court order was deposited with the caveat upon lodgement, it was lodged by the Registrar, or lodged by the registered proprietor.
The registered owner of a lot is notified once a caveat has been lodged against their property.
The registered owner may then issue the caveator with a notice to commence legal proceedings within 14 days to prove their claimed interest in the land.
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How may a caveat be removed?
Owning a property in Queensland that has a caveat upon it can be very inconvenient and frustrating for future plans.
However, a caveat may be removed from the title through four ways, these are:
- by it lapsing;
- through an application to the Supreme Court;
- by registrar’s cancellation/rejection (s 128 of the LTA); or
- by the caveator withdrawing it.
Is a second caveat able to be lodged to further protect an interest?
As stated under section 129 of the Act, a further caveat cannot be lodged by same caveator on the same or substantially same grounds, unless there is leave by court.
However, if there are new grounds and a different interest, it may be allowed.
Can compensation be claimed for the improper lodgement of a caveat?
The lodgement of an improper caveat without reasonable cause may attract serious penalties.
Under section 130(1) of the LTA, a person who lodges or continues a caveat without reasonable cause, must compensate any persons who suffer loss or damage as a result.
The caveator must show there was reasonable cause in lodging or continuing a caveat in Queensland (section 130(3) of the LTA).
A case which demonstrates the consequences of the section is Von Risefer & Ors v Permanent Trustee Company Pty Ltd & Ors, where the caveator had lodged four caveats over a property on substantially the same grounds.
Previous caveats had been removed by court order due to lack of caveatable interest, and for the additional caveats the court ordered:
- the caveats be removed, and
- the plaintiffs,
- be restrained by way of an injunction,
- from lodging any further dealings against the property, without obtaining leave of this Court;
- compensate the defendants the sum of $2,170.30, being the defendant’s legal fees for removing the caveats; and
- pay the defendants costs of and incidental to the legal proceeding.
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In conclusion, caveats are quite a complex area of law, and the incorrect lodgement can have serious consequences, as seen in the case above.
It is highly recommended you obtain legal advice in lodging or removal of a caveat to ensure it is done correctly.
Please use our website today to find a suitable property lawyer on the Sunshine Coast.
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