When can I lodge a caveat in Victoria?

Written by Catherine Micallef

What is a caveat?

A caveat is a registration on a title of land that claims an “estate or interest” in that land.

Lodging a caveat notifies the Registrar of Titles of the claim as well as notifying others that search the land title of the claim. Once you have registered a caveat, you receive notice if there is any dealing on that land. Although it does not give you the same rights as a mortgagor, a caveat can act as security and peace of mind to lay claim on the land and stop future dealings.

Who can lodge a caveat?

Any individual or corporation can lodge a caveat over a specific property, however in order to be able to lodge a caveat it is essential that you have a caveatable interest.

Without a caveatable interest, it is unlikely that your caveat will survive Court scrutiny and that may have consequences.

Now that most property transactions occur online through the PEXA platform – it is convenient and can be beneficial to engage a legal practitioner to lodge a caveat on your behalf.

What is a caveatable interest?

In order for a caveatable interest to exist, the caveator must have a current legal or equitable interest in the land.

Common examples include:

· A purchaser under a contract of sale;

· An unregistered mortgage;

· By agreement granting a party a charge (the right to lodge a caveat) of the land as security for the performance of any obligation;

· By guarantee which gives the right to lodge;

· A lessee under a lease; and

· A holder of an option to purchase property.

What is not a caveatable interest?

Some of the most common examples which do not support the lodgement of a caveat are as follows:

· Debts without an agreement which allows the lender to have a charge on the land - Caveats are not enforcement tools which can be relied upon when someone is owed money.

· A purchaser with only an oral agreement;

· A lender claiming costs when the loan did not proceed; and

· A beneficiary under a discretionary trust.

What happens if a baseless caveat is lodged?

Whilst Land Victoria may accept a caveat, they do not determine if there is a proper caveatable interest supporting the lodgement. If any improper caveat is registered, the registered proprietor can apply to have the caveat removed and you will be required to take court action to prove your caveatable interest.

If the Court determines that the caveat is baseless the Court will likely order that your caveat be removed and that you pay the legal costs of the other party which could be significant. You will also be liable for any loss caused by the caveat because the caveat prevents dealing with the land. For example: the difference in the price the land could have been sold for if a sale had not been stopped by the caveat or any losses caused by sale delays.

How can I ensure that I have a caveatable interest?

If you are looking to make an agreement to secure your interest in a property, it is essential that your agreement clearly grants you a caveatable charge over the property. Once your agreement is carefully drafted to ensure that a caveatable interest is created, you may proceed with lodging the caveat.

When lodging the caveat, it is critical that the basis for the caveat and the supporting documentation adequately describe the caveatable interest. Any error in describing the caveat can render your caveat unenforceable notwithstanding that the underlying reasoning behind the caveat may have merit. Engaging a legal practitioner to ensure that these fundamental aspects of your caveat are right at the outset can ensure that you are effectively securing your interest in.