Caveats on property can affect your settlement

Caveats affect many property settlements each year, but the processes involved in removing a caveat remain poorly understood by some sellers and agents.

What is a caveat?

A caveat is a notification on a title that warns prospective purchasers, mortgagees and others who propose to deal in the land that a third person (normally the person lodging the caveat, the caveator) has some right or interest in the land. An Absolute caveat prevents the Registrar of Titles from registering any further instrument on the title. Since a Transfer of Land is one such instrument, most caveats must be removed for a property to settle.

Can you buy a property with a caveat on it?

The strict answer to this question is yes, but in practise that rarely happens. In the case of Absolute caveats Landgate is prohibited from lodging any further instrument on the title (a Transfer of Land for example) until the caveat is removed. In other words, the property won’t settle until the caveat is removed.

How are caveats removed?

There are many ways to have a caveat removed from a title. The simplest is for the caveator to lodge a Withdrawal of Caveat.

If the caveator refuses to remove the caveat, the settlement agent will lodge a 21-day-notice with Landgate, and one of two things will happen:

  • If the caveator doesn’t take the matter to court within the 21 days, the caveat is removed.
  • If the caveator takes legal action and a court injunction is issued, Landgate puts the Title into a Registrars Packet and moves it into Complex Dealings, so the caveat remains. Depending on the course of the legal proceedings, the property may not settle for a long time.

A recent settlement, for example, was delayed for nine months because of complications caused by a caveat on the Title. This case was a ‘mortgagee in possession‘ sale, and nine caveats had been lodged on the Title. At the request of the seller’s settlement agent, eight of the caveats were removed by their caveators – but one refused.

The caveator was owed a debt by the current owner, and commenced legal proceedings to seek payment of the debt owed. A court injunction was issued, and the Title was put into a Registrars Packet by Landgate.

Since the Title was now in a Registrars Packet, the property couldn’t settle. The legal proceedings stretched on, and settlement was delayed by nine weeks. Such a long delay is highly inconvenient for all parties, and could have cost the seller thousands in penalty interest – but in this case, the Offer and Acceptance had specified that the seller could not be charged penalty interest.

To prevent long delays and costly penalty interest, be aware of the importance of dealing with caveats early in the process. Having caveats removed as soon as possible will reduce the risk of a delay in settlement.

How long does a caveat last?

Once a caveat is registered on a title it remains in place until either withdrawn by the caveator or through other means not attributable to the caveator.

How do you know if you have a caveat on your property?

Section 138 of the Transfer of Land Act requires the Regsitrar of Titles to notify the registered properietor of a property when a caveat is lodged on their title. This notification is sent by normal post to the registered address of the propritor. But if the owner has moved since purchasing the property and not had their registered address updated then they may not be aware of the existence of the caveat. If you suspect that a caveat has been registered on your title, purchase a title search from Landgate.

Image by Gawler History via Flickr.