Where you have an estate or interest in land, lodging a caveat may be something you want to pursue in order to protect your interests. However, what exactly is a caveat and how do you know whether you have a caveatable interest?
A caveat is a type of statutory injunction that prevents the registration of dealings with real property. It provides a warning or formal notice to inform the public that there is an interest on the land.
The party who lodges a caveat is referred to as the caveator.
Lodging a caveat allows an individual to protect their interest in a property. However, before lodging a caveat, the individual must ensure that they have a caveatable interest.
The rules governing lodgement and registration of caveats are set out in different legislative instruments in each state and territory. In the ACT, section 104 of the Land Titles Act 1925 (ACT) provides that a person claiming an interest in land (or their legal practitioner) may register a caveat. In NSW, the Real Property Act 1900 (NSW) provides for registration of a caveat by a person claiming a legal or equitable estate or interest in land.
A caveatable interest is different from a regular interest, must always amount to an interest in the land itself, and may potentially include:
It is important to always obtain legal advice prior to seeking to lodge a caveat, as there are significant consequences for lodgement where a caveatable interest does not exist.
While caveats are frequently used instruments and can be effective in protecting legal or equitable interests, individuals seeking to lodge a caveat should ensure they are not doing so ‘without reasonable cause’. In the ACT, section 108 of the Land Titles Act 1925 (ACT) provides that any person lodging any caveat without reasonable cause shall be liable to pay compensation to anyone who has sustained damage as a result of the incorrect lodgement. Similar provisions are applicable in NSW, under section 74P of the Real Property Act 1900 (NSW).
For example, where an individual has taken steps to lodge a caveat over a property where they do not have a valid caveatable interest, and settlement or sale of a property is prevented or delayed, that person may be liable to pay damages to the registered proprietor for any loss suffered.
The High Court case of Boensch v Pascoe [2019] considered the issue of what it means to lodge a caveat ‘without reasonable cause’. In that case the court applied the two-step reasonable cause test as previously set out in Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990).
The two-step test provides that a caveat is lodged ‘without reasonable cause’ if the lodging party:
For anyone considering lodgement of a caveat, it is important to establish that they have a sound caveatable interest and that the caveat has been properly prepared, not only to inform whether they can lodge the caveat, but also whether they may be exposed to certain liabilities if their caveat is inaccurate or inadequate. If you are looking to lodge a caveat, or have any questions in relation to this article, please do not hesitate to contact the BAL Lawyers Property team on 02 6274 0999.