A caveat is a warning which comes from the Latin word for ‘beware’.

Where a person has an unregistered interest in real estate, a caveat may be lodged to give notice of their interest. Depending on the type of caveat lodged (absolute or permissive), a caveat can prevent any further dealings with a property until it is removed or withdrawn.

The important thing to note when lodging a caveat is that the interest that is claimed must attach to the land itself.

Interests that are commonly the subject of a caveat include unregistered mortgages, leases and other equitable interests in property. The bottom-line is that the caveator (person lodging the caveat) must have an actual interest in the land itself. If a person is seeking to enforce an interest unconnected with the land itself, a caveat is not the appropriate remedy.

Examples of caveatable interests are:

  • an interest as purchaser under an agreement for sale;
  • an interest as purchaser under a conditional agreement for sale where the Courts would grant an injunction to protect the interest;
  • an option to purchase;
  • an equitable mortgage;
  • the interest of a registered mortgagor, where the mortgagee has entered into a voidable contract of sale;
  • an equitable lease;
  • an easement;
  • an oral agreement for the extension of an easement supported by acts of part performance;
  • the interest of a unit holder in a unit trust;
  • a beneficial interest under a resulting trust;
  • a profit á prendre;
  • exclusive mining rights;
  • an inchoate interest in the land; and
  • a builder’s contractual right to charge the land with all monies owing.

Trustees in bankruptcy can also lodge caveats over property owned by the bankrupt and the bankrupt’s spouse to protect the estate and interest of trustees of the bankrupt’s estate. Failure to lodge a caveat could have serious consequences.  In IIB Global NV v Pascoe (No 2) [2011] NSWSC 1270 the lodgement of a caveat prevented the transfer of a mortgage from the mortgagee to the first respondent.

A profit (short for profit à prendre, meaning "right of taking") in the law of real property is a non possessory interest in land similar to the better-known ‘easement’ which gives the holder the right to take natural resources such as petroleum, minerals, timber, and wild game from the land of another.

Inchoate interests are generally property interests that are likely to vest, but have not yet actually done so. The inchoate interest usually is dependent on an event occurring that triggers the interest, such as a relative's death triggering an inheritance. The interest that the inheriting relative has in the inheritance is inchoate until the death occurs, at which point it becomes a real interest.

Note that if a worker is owed money in relation to work they have done on the land, a Worker’s Lien can be lodged on the title in lieu of a caveat. However, pursuant to section 15 of the Worker’s Liens Act 1893, a lien under that Act upon an estate or interest of any owner or occupier will cease unless an action is brought against the owner or occupier to enforce the lien within 14 days from the registration of the lien. The same provisions under the Real Property Act 1886 relating to caveats apply to the Worker’s Lien, however, the provisions under the Real Property Act that authorise the removal of a caveat by application to the Registrar-General are not considered to apply to a notice of a Worker’s Lien.

If you have contributed to the purchase of land or have improved the land physically somehow, you may also have a caveatable interest in the land. For example, a partner to a former domestic relationship may well have the proprietary rights to the land on the basis of a resulting trust or a constructive trust as was the case in Baumgartner v Baumgartner (1987) 164 CLR 137.

A registered proprietor may also lodge a caveat against dealings with his or her own land, but the burden of proof rests on the caveator to justify the caveat.  In Daniell v Paradiso (1989) 154 LSJS 146, the courts ordered that the caveat be removed to allow for the registration of a mortgage. The authorities recognise a number of other circumstances in which it may be appropriate for a registered proprietor to lodge a caveat. Examples of this include where the registered proprietor believes their interest in the land may be threatened by fraudulent activity or to prevent the registration of a transfer until payment of the purchase money.

However, some authorities indicate that in order to lodge a caveat on its own title, a registered proprietor must have some interest, or point to some circumstance, going beyond its status as registered proprietor.  In Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870, it was determined that the registered proprietor had a right to lodge a caveat against its own title to prevent their mortgagee from completing a voidable contract of sale for the land.

Examples of non-caveatable interests are:

  • the interest of a purchaser under a conditional contract of sale where the courts would not protect the interest by granting an injunction;
  • a prima facie equity to set aside a transaction for fraud;
  • the interest of a person who has made improvements to another person’s land, but has not obtained an order for relief;
  • an agreement to share profits on resale of land;
  • recovery of a debt unrelated to the land;
  • mere possession of a building site by a builder; and
  • a mere equity to set aside a mortgagee’s sale allegedly made in breach of the mortgagee’s duties.

Generally, caveats protect property rights that exist in equity rather than under the Real Property Act. In South Australia, caveats do not lapse. They protect the interest until they have been withdrawn, removed or have otherwise been extinguished.  A caveat cannot be relodged without the leave of the Supreme Court.

An application can be made to the Registrar General for the removal of a caveat if the caveatee (the person against whom the caveat is directed) objects to the caveat (Real Property Act 1886 s191(e)).  The Registrar General will then send a notice to the caveator giving 21 days notice of his intention to remove the caveat.

If the caveator wants the caveat to remain, he or she must make an application to the Supreme or District Court, which may extend the time before the Registrar General removes the caveat or until further order.  A State Court has no jurisdiction to extend the caveat where the interest claimed is the subject of a matrimonial case under the Family Law Act 1975 (Cth); in which case orders can be sought in the Family Court of Australia.

If the 21 days passes, the Registrar General must remove the caveat by entering a memorandum that the caveat is discharged (s 191 (f)).

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this article, or what it means for you, your business or your clients' businesses, please feel free to contact us.

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Mark Minarelli

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