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Buyer Beware! There's a Caveat There!

Oct 20

Caveats are an important tool to protect interests in land. But what exactly is a caveat? If someone owes you money does this entitle you to lodge a caveat?

A caveat is a legal document which, when registered on title, prevents the registration of any dealing affecting the interest claimed in the caveat by the Caveator until the caveat is withdrawn, removed, lapsed or cancelled.

In Queensland, a caveat can be lodged on the title by one of the following:

  • A person claiming interest in a lot;
  • The registrar under section 17 of the Land Titles Act 1994 (Qld) who has the power to do so;
  • The registered owner of the lot to protect their interests probably if someone is trying to sell the owner’s property;
  • A person to whom an Australian Court has ordered that an interest in a lot be transferred; or

A person who has the benefit of a subsisting order of an Australian Court in restraining a registered proprietor from dealing with a lot.

The Effect of a Caveat on Your Property

If you own land in Queensland, and someone has lodged a caveat over the land, you will generally be prevented from transferring or dealing with the land until the caveat is withdrawn, removed, lapses, or is cancelled. As the owner of the land, you are known as the caveatee and the person or entity putting the caveat on your property is known as the caveator.

The caveat is registered at the title’s office (Department of Natural Resources and Mines). You can learn more about the process of lodging a caveat and the risks involved here.

Who Cannot Lodge a Caveat

You cannot lodge a caveat where you feel you have been wronged or if you have loaned money and have not been repaid. In fact, there are penalties for lodging a caveat without reasonable cause.

To lodge a caveat, you must have what is known as a "caveatable interest". Whether you have a “caveatable interest” can be technical and you should obtain legal advice to establish if you have an interest in the land prior to lodging a caveat.

Once lodged, the caveat will prevent the property from being sold or any other dealing being registered, such as a mortgage, unless the caveat is withdrawn, removed, lapses, or is cancelled.

Exceptions to Lodging a Caveat

Exceptions to the effect of lodging a caveat under section 124(2) of the aforementioned act, the lodgement of a caveat does not prevent registration of the following:

  1. An instrument specified in the caveat, as one to which the caveat does not apply,
  2. An instrument, if the caveator consents to its registration,
  3. An instrument executed by a mortgagee whose interest was registered before lodgement of the caveat, if:
    1. The mortgagee has power under the mortgage to execute the instrument, and;

The caveator claims an interest in the lot as security for the payment of money or money’s worth.

After a Caveat is Lodged

After a caveat is lodged, Titles Queensland checks to ensure it meets legislative and administrate requirements. If the caveat meets the requirements, it will be registered. However, registration of the caveat does not prove that the interest claimed in the caveat exists – this is for the courts to determine.

The length of time for which a caveat affects a title depends on the nature of the caveat and the steps taken by the parties. In most cases, the duration of a caveat ranges from fourteen days to three months. Action taken by the person who lodged the caveat may change the time frame so that the caveat remains effective until a court makes a determination as to the property dispute. It is important that parties seek legal advice relevant to their own circumstances.

Removal of a Caveat

Removal of a caveat occurs in the following ways:

1. Withdrawal of the caveat by the caveator;

A caveat may be removed by the caveator if they lodge a withdrawal of the caveat request with the land titles registry. This will also be achieved by negotiating a settlement with the caveator. This is often the most cost-effective and quickest method to resolve a caveat dispute aside from letting the caveat lapse.

2. Lapsing of the caveat (section 125);

In Queensland, a caveat is either lapsing or non-lapsing. Non-lapsing caveats are those that are lodged:

  1. By the registered owner;
  2. With the consent of the registered owner;
  3. With a court order; or
  4. By the registrar of land titles.

All other caveats that do not fall under the above categories are lapsing caveats. This means they will be removed from the land title once they have lapsed. A caveat created by will automatically lapses after three months from its creation; this is unless the caveator starts court proceedings to ensure the caveat remains on the title.

3. An order by the Supreme Court of Queensland that the caveat can be removed (section 127);

The application can be made regardless of whether or not the caveator had been formally served with the application. The out has the discretion to determine these orders.

This method should be used if:

      1. You cannot locate the caveator;
      2. The caveator has since deceased; or
      3. You are unaware of who the caveator is.

4. Cancellation or rejection of the caveat by the Registrar (section 128).

The other option which exists for the registrar of the land titles to cancel a caveat. This occurs if you lodge a request to cancel and the registrar is satisfied that the;

  1. Interest under the caveat claimed has ceased, been abandoned or withdrawn;
  2. The caveat claim has been settled by agreement or otherwise satisfied; or
  3. Nature of the issue does not entitle the caveator to prevent another lodged registration.

It is important to understand the risks associated with lodging a caveat before doing so.

Caveator Compensation

If it is found that a caveat has been lodged improperly, the caveator may be liable to compensate anyone who suffers loss or damage as a result.

An example of this is if the sale of the property has been held up or fallen through because of the caveat being lodged. If it is found by the court that the caveator did not have sufficient grounds to lodge the caveat the caveator may be liable for the losses associated with the loss of sale.

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We have extensive experience in advising clients on what constitutes a caveatable interest and what is required to register or remove caveats from the land register.

If you have any queries about caveats or any other aspect of property law, we can be contacted on 07 5443 9988 or [email protected].

Argon Law is a Sunshine Coast law firm based in Maroochydore.  We are commercial lawyers and wills and estate lawyers and are eager to assist you in any way we can.