LODGING A CAVEAT - HOW SAFE IS IT?

28/04/2009

Our client owned a parcel of land.  The next door neighbour had erected a common fence some time ago encroaching on our client’s land by some 30cm.  This wasn’t an issue to our client until recently they discovered the neighbours were thinking of selling their land.  Our client then came to us and instructed us to lodge a caveat on the neighbour’s land so that they couldn’t just sell their land without first settling the encroachment issue.

 

A caveat literally means “beware”.  By lodging a caveat over a property you are telling anyone who wants to deal with the property to be aware of the fact that someone else's interest may have priority.  

 

In other words, a caveat is a written warning to anyone who checks the land registry that the person who lodged the caveat (known as the "caveator") has an interest in it. The Registrar General cannot deal with the property without first notifying the caveator.

 

The formalities of a caveat are pretty simple and the Registrar General does not even consider whether you actually do have what is known as a ‘caveatable interest’ when you lodge one.  As long as all the relevant fields are filled in correctly, they will accept the caveat and register it for you.

 

But here is the catch.  You can only lodge a caveat if you claim to have a legal or equitable estate or interest in the land.  For this reason, a caveator has to have a proprietary right in the land.

 

Our clients didn’t actually have a legal or equitable interest in the adjacent land.  Our client’s proprietary interest in their land may be affected by the encroachment issue but this did not mean they had an interest over the adjacent land.  We advised our client to take a different course of action to rectify the problem.

 
When a caveat is lodged, it stays on the registry until the merits of the caveator’s claim is tested.  If it is found to have no caveatable interest, the consequences may be quite severe given that a caveat can prevent a purchaser’s Transfer of Land from being registered or cause a lender to refuse to provide funds on settlement day.  The caveator may be required to pay for the loss suffered to the vendor of the land.  For this reason, it is extremely important to understand whether you have a right to lodge a caveat before you do anything.

If you believe that you have a caveatable interest over someone else’s property or believe that someone has improperly lodged a caveat over your land please contact Townsends Business and Corporate Lawyers on (02) 8296 6222 and we will be happy to assist you.