If you are considering buying property in NSW, deciding whether to lodge a caveat with NSW Land Registry Services (LRS) should be a key consideration.
A caveat (also known as an unregistered interest) is a legal notice placed on the property’s title to alert other parties that the person lodging the caveat (the caveator) has an interest in the property.
The caveator provides details of their claim and ways they can be formally contacted in connection with the caveat. NSW Land Registry Services notifies anyone with an interest in the property who is affected by the caveat.
What does having an “interest” in property mean?
It means that someone else has an interest in the property (e.g. where there is a nexis between a debt and the property, or the caveator has an equitable interest in the property).
A caveat is a warning to anyone who checks the certificate of title of the property that the person who lodged the caveat has an interest in it. Lodging a caveat over a property is a way of telling anyone who wants to deal with the property that someone else’s interest already has priority. NSW Land Registry Services must notify the caveator before they can deal with the property.
Who can lodge a caveat?
On signing a contract to buy real estate, a purchaser acquires a “caveatable interest”. That is, they are entitled to register a caveat to protect their interest.
Only a person with a caveatable interest is entitled to lodge a caveat. It is best to have the caveat lodged by a lawyer so you can be advised as to whether a caveatable interest exists, whether the contract for sale prohibits lodging a caveat, or whether further registrations may be required. A carelessly lodged caveat could prevent a purchaser’s own transfer from being registered or cause a lender to refuse to provide funds on settlement day.
A caveat is merely a notice of claim which may or may not be valid: at some stage the validity of the claim must be determined.
A common misconception is that any creditor can caveat a debtor’s property to secure the repayment of a debt. Many creditors expose themselves to considerable risks in cost penalties because they have registered a caveat without necessarily having a caveatable interest.
The two main procedures to remove a caveat are:
- Removal by Application to the Registrar General; and
- Removal by Order of the Supreme Court of NSW.
In either procedure, to prove you have a caveatable interest, you must commence or defend court proceedings. A caveat without any merit can mean the registered owner is entitled to compensation if they suffer any losses as a result. If you are unsuccessful in proving a caveatable interest, costs will be claimed from you.
Even if you have a caveatable interest, you may generally only lodge a caveat for that property for that interest once. If your caveat is removed due to your failure to prove your interest, you have no further opportunity to caveat the property for the same interest.
The timing of the lodgment of a caveat can also be important.
NSW Land Registry Services charges a registration fee.
How long does a caveat last?
A caveat prevents the registered owner from selling the property for 21 days from the date of service of a notice that a caveat has been lodged against the land. A caveator can however within the 21-day period choose to extend how long the caveat lasts by obtaining and lodging with NSW Land Registry Services a Supreme Court of NSW Order.
Can you have a caveat withdrawn?
A caveat remains in effect until it is withdrawn, removed, or otherwise extinguished. NSW Land Registry Services cannot register any transactions involving land while a caveat is still in force. A caveat can be withdrawn at any time by the caveator filing forms and paying fees.
A caveat can be withdrawn in several ways. Most commonly a Lapsing Notice is issued by the property owner then served on the person who has lodged the caveat. The caveator then has 21 days from the date of service to seek an order from the Supreme Court of NSW extending the operation of the caveat. If an order is granted, it must be lodged with NSW Land Registry Services within a specified period. If the caveator takes no steps, the caveat will lapse (i.e. it will fall off the title).
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Contact us now for free no-obligation initial telephone advice about lodging a caveat against or removing a caveat from a property.
