“Caveat” basically means a caution or warning. A caveat on the title has two purposes:
1. It is a warning to all the world that a person claims an interest in the land; and
2. It acts as a statutory injunction restraining the Registrar from registering a dealing affecting the land without first notifying the caveator.
A caveat does not create anything, nor does it bring into existence a right not already in existence. Although it has no effect to create, it does protect an existing right inland.
Some interests in land are not capable of being registered. A caveat is a method by which such interests are noted on the title. This notation or endorsement does not confer ownership but it does provide a measure of protection for the caveator.
The two most common caveats are:
- the Queen’s caveat lodged by the Land Titles Registrar
- and the private caveat lodged by individuals.
A Queen’s caveat sometimes referred to as a Registrar’s caveat can be lodged by the Registrar under section 106 of the Transfer of Land Act. It is used where land has been misdescribed, to prevent fraud or to protect persons under a disability or underage or absent from Victoria. The Registrar now has the power under section 106(3) to remove the Queen’s caveat if satisfied that the caveat is no longer required for the purpose for which it was recorded. It may, however, not be possible to satisfy the Registrar of this.
The caveat will lapse on registration of a dealing that will not breach the Queen’s caveat. So sometimes the only way to get rid of the caveat is to lodge a dealing. Unfortunately, there is no way to be certain that the dealing will be registered until it is. That makes this area one of great uncertainty.
Private caveats are used by the public to protect a wide range of equitable interests, such as a purchaser under a contract of sale, a claim for the benefit of an easement, a person entitled to a mortgage or charge, and a claim under a constructive trust.
Lodging a Caveat
Any person claiming any estate or interest in land is entitled under section 89 of the Transfer of Land Act to lodge a caveat on title. However, section 53 of the Property Law Act requires all interests created or disposed of inland to be in writing. Usually, but not always, the claim will be based on a document.
The approved form of a caveat for use under the Transfer of Land Act is approved form C. Production of the certificate of title is not required to lodge the caveat and stamp duty is not payable on a caveat.
As of 1 December 2017, all standalone caveats must be lodged electronically. The practitioner lodging it will need to verify the identity of the caveator and have a client authorisation form. Section 118 gives a remedy for the registered proprietor against a
caveator who lodges a caveat without reasonable cause. The Caveator will be held liable for any damages that flow from this caveat.
Lodging a purchaser’s caveat
Any person claiming any estate or interest in land is entitled under section 89 of the Transfer of Land Act to lodge a caveat on the title for that land. It acts as notice to any party searching the Register that there is an existing contract relating to that particular piece of land. It is prudent conveyancing practice to lodge a purchaser’s caveat but it is relatively uncommon. Land Registry figures reveal that fewer than 15 percent of purchasers take advantage of this process. This could be attributed, in the main, to the time and cost involved in preparing and lodging a caveat and the registration fee involved as balanced against the timeframe from the day of sale until settlement. Unless the contract is for a period exceeding 90 days, it is not common practice to lodge a
Removing a Caveat
There are four options available for the removal of a caveat:
- The caveat lapses. If a dealing is lodged where there is a caveat on title the Registrar will give the caveator notice that the caveator has 30 days within which to take action to prevent the registration of this dealing. If the caveator fails to take any such action then the caveat will lapse. A purchaser cannot be expected to take title and rely on these lapsing provisions contained in section 90(1) of the Transfer of Land Act as a caveator could take action to justify the caveat.
- A withdrawal of caveat can be obtained from the caveator. As with caveats s withdrawals must also now be lodged electronically. Usually a caveator obtains some legal advice regarding their claim and often it is the caveator’s solicitor who lodges the caveat and gives the withdrawal of caveat on behalf of their client. Where a withdrawal of caveat is signed by anyone other than a solicitor who initially signed the caveat, additional Land Registry requirements could apply. No stamp duty is payable on a withdrawal of caveat and the certificate of title THE LAND TITLE 31 is not required to be produced to lodge it.
- Section 89A of the Transfer of Land Act sets out the procedure for removal of a caveat on application to the Registrar of Titles. This can only be achieved if a solicitor is prepared to sign a certificate stating that there is no caveatable interest and would only be appropriate if the solicitor were in possession of all the relevant information required to make this judgment. Upon receipt, the Registrar serves a notice on the caveator advising the caveator that the caveat will lapse after a period of not less than 35 days of service unless the caveator institutes court action to justify the caveat. In reality, the procedure under section 89A is too time consuming, especially when a settlement is imminent.
- Section 90(3) of the Transfer of Land Act sets out the procedure to be taken by a registered proprietor seeking an order that the caveator remove the caveat. Proceedings under this section are effective and relatively fast. It is usually the threat that an application will be made for costs which encourages the caveator to withdraw the caveat or at least become reasonable.
- Some caveats will lapse automatically. This will happen where a caveat claims an interest as purchaser and a transfer of land to the caveator is lodged. This applies where at least one of the transferees is the caveator. The caveat will not, however, lapse when there has been a nomination under the contract in favour of an entirely different party. In that case a withdrawal of caveat will be required.
Another situation where a caveat will lapse automatically is where there is a mortgagee sale. For this to apply the caveat must have been lodged after the mortgage and claim a charge securing payment of money.’