Caveats – What you need to know

Torrens Title is a method of recording and registering land ownership. It is a system where land ownership occurs when the document that transfers ownership of the property is filed at the local Land Titles Office. The purpose of the Torrens system is to provide certainty of title to land.

Some interests in land such as a purchaser or tenant are not capable of being registered, so the caveat system creates a method for registration of those interests, whilst not affecting the ownership of the property.

What is a caveat?

A caveat is a document that any person with a legal interest in a property (but for the registered owner of the property) can lodge at the Land Title Office. After recording, a note appears on the title giving anyone searching the title notice that a third party claims rights over the property.

Caveatable Interest? 

A caveat can be lodged on the title if a person has a caveatable interest. Interests include a leasehold estate (tenant), an interest as charge (someone has given a charge), an interest as mortgagee (lender) or an estate for life (life tenant). However, the most common caveatable interest is an interest pursuant to a Contract of Sale. In this situation, a caveat is registered on the title to give notice to all persons searching the title that a person other than the registered owner has an interest in the property and to ensure that no further transaction occur in relation to the property prior to the settlement date.

There is often a misconception about debts and caveats. For example, if you loan money to a third party and that party does not repay that debt, does this give you a right to lodge a caveat on the title of the property of that third party? The answer is a debt is never on its own a caveatable interest. For the debt to be a caveatable interest, the debt must be evidence in writing (loan agreement) and provide for the property to be charged with the liability to pay the debt.  A document that evidences the debt, but does not charge the land, is not sufficient for a caveatable interest.

Grounds of Claim

Having established the nature of the caveatable interest, the caveator must set out the grounds of claim. Section 53 of the Property Law Act 1958 (Vic) requires all interests in land to be created or disposed of in writing. For example, a purchaser would have a Contract of Sale to rely on for their grounds of claim and a tenant would have a lease to rely on.

However, in limited circumstances a caveat does have a ground of claim where no documentary evidence is available. This situation arises, a trust relationship arises that is not evidenced in writing. This is the basis of claim in a matrimonial or de-facto situation, where the property is registered in the name of only one of the parties. The other party can claim an interest in the property on the basis of a constructive trust.

Claims that are inappropriate or insufficient to support a caveat including, an unsuccessful bidder at an auction, a purchaser relying on an oral agreement, a lender claiming costs when a loan did not proceed, an interest pursuant to a joint venture agreement or a purchase from a vendor who did not have the ability to transfer the title.

Registration of a Caveat

A caveat should be lodged as soon as the caveatable interest is created in the property. If there is a delay in lodging the caveat, there is a risk that a transaction might occur in relation to the property that would affect the caveatable interest.

Once a caveat is registered on title to a property, the Registrar of Titles of the Land Title Office is required to send a notice to the registered proprietor notifying them of the lodgement of the caveat.

Withdrawal / Removal of a Caveat

If a registered proprietor disputes the caveatable interest or grounds of claim of the caveat, a caveat can be removed from the title to the property either voluntarily or through a forced removal process.

In the situation that the caveator agrees to the removal their caveat from the title to the property, a Withdrawal of Caveat form must be lodged and registered at the Land Titles Office. Section 89A of the Transfer of Land Act 1958 (Vic) provides a mechanism for the removal of a caveat if the caveator refused to withdraw their caveat or cannot be located. Using this provision of the Act, an application is made to the Registrar of Titles and is supported by a solicitor’s certificate to the effect that the caveator no longer has the interest claimed. The Registrar of Titles is required to send a notice to the caveator notifying them of the application and given them a specified period to either issue proceedings or the caveat will be withdrawn.

If the caveator will not provide a withdrawal, a Section 89A Application is not an option, then a person who is adversely affected by a caveat can apply to the Supreme Court for its removal.

Wrongful Lodgement

A person who lodges a caveat without reasonable cause will be liable for any loss or damage that follows. Further, a solicitor who lodges a caveat knowing that there is no legitimate basis for the caveat will be guilty of professional misconduct and may be personally liable for damages.

For further information on caveats or your right to lodge a caveat, please contact us at info@centralhighlandsconveyancing.com.au or on 5303 0281

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The information on this website is of a general nature only. It is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice about your particular circumstances.

Liability limited by a scheme approved under Professional Standards Legislation. 

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