NSW: Am I Entitled to a Caveatable Interest in Property?

Written by Hanaa Merhi

What is a caveatable interest in a property:

A caveatable interest refers to a legal or equitable interest in a property that entitles an individual to lodge a caveat with the Registrar-General. This interest serves as a notification to others that the individual has a proprietary stake in the property, preventing others from dealing with the property without their consent. It typically includes interests such as a purchaser’s interest under a sale agreement, a vendor’s lien, or a mortgagee’s or chargor’s interest.

 A caveatable interest is different from a regular interest in the property. It is important to distinguish between caveatable and non-caveatable interests.

Under the Real Property Act 1900 (NSW), a person may lodge a caveat with the Registrar-General if they are entitled to a legal or equitable interest in land. As set out above, this  notifies other people that you have a proprietary interest in the property and, in some circumstances, prevents others from dealing with the property without your consent. It also means the Registrar-General knows not to register any dealings, except for some statutory exceptions, that are inconsistent with your caveatable interest. This article explains how you can determine whether you have a caveatable interest in property, as well as the process for lodgement.

How can I determine if I have a caveatable interest?

A caveatable interest includes:

• a purchaser’s interest under an agreement for sale;
• a vendor’s lien;
• a purchaser’s lien;
• That of a mortgagee with an unregistered mortgage;
• On the grounds of an implied, resulting and constructive trust.
• Bankruptcy trustee interest pursuant to Section 58 of Bankruptcy Act 1966.
• Express charge clause contained in an agreement.

Only those who have an express interest in the property, such as a chargee or mortgagee, can claim a caveat. An express interest is where the parties reach an agreement for the caveat to go on the property.

What is Process for Lodging a Caveat in NSW:

A caveat can be lodged by a solicitor or conveyancer electronically with the Land Registry Services using an online platform, such as PEXA, unless an exception applies.

The caveat must be lodged in a specific form, detailing the following details: 

• the title reference for the land;
• the full name of the registered proprietor(s) of the land;
• details of your caveatable interest;
• the facts on which the caveator’s claim is based, such as a fully executed contract for sale or a written agreement; and
• The signature of either the caveator or their agent. Your lawyer can also sign on your behalf.

The Most Common Caveat

The most common caveat we consider is that of a chargor or mortgagor in respect of a charge provided by the registered proprietor over the relevant land in accordance with an agreement such as a guarantee, a credit application or loan, or security deed, or a mortgage.

The most common way to way to incorporate this interest is by including a charging clause in the agreement.

What is a charging clause?

Merely being owed money does not automatically establish a caveatable interest. A charging clause is the specific wording in an agreement or contract that allows a creditor a charge over your interest in an asset. Essentially the creditor gains the status of a secured creditor or equitable mortgagee. This means that the creditor may be able to lodge a caveat or a mortgage over your property.

The Agreement should contain an operative clause under which the purchaser/customer is obliged to grant and register a caveat over the property.

There is no standard or set wording to apply a charging clause. The precise wording can differ for terms of trade, lease, guarantee, cost agreement, mortgage or commercial contract.

How do I withdraw a caveat?

In NSW, the formal withdrawal process requires the caveator to decide to withdraw their caveat. To do this, the caveator (or their solicitor) must complete and sign a withdrawal of caveat form and lodge this together with the fee.

The following individuals can also apply to withdraw the caveat:

• if joint tenants hold a caveat and one caveator dies, the surviving caveator;
• the executor, administrator or trustee of a deceased caveator;
• the Australian Securities and Investment Commission (ASIC); and
• a trustee when the caveator is an infant or is deemed mentally incapable.

This process is only suitable where the caveator wishes to withdraw the caveat. Where the registered owner, or another party with a relevant interest, wishes to remove the caveat, then the other methods set out below should be used.

Lapsing

A caveat may also be removed if it lapses. For example, this occurs when:

• the caveator’s interest is satisfied by the registration of another dealing.
• the registered owner or a party with registered interest lodges an Application for Preparation of Lapsing Notice; or
• a party lodges a dealing that the caveat prevents together with an Application for Preparation of Lapsing Notice.

The registered property owner or another interested party may typically use an Application for Preparation of Lapsing Notice to remove the caveat where the caveator will not agree to withdraw formally. The property owner may wish to register another dealing on the land, which the caveat prevents, and seek to apply for the lapsing of the caveat. You must use the relevant LPI form. Once you have lodged the form, the caveat will lapse and expire after 21 days.

Deciding on the process to remove a caveat will depend on the circumstance of your matter. As the registered proprietor of the land, you should keep in mind where:

1. the caveator no longer has an interest or wishes to withdraw, they can do so by a formal withdrawal;
2. you wish to remove the caveat and consider that there is unlikely to be a dispute, you should file an Application for Preparation of Lapsing Notice;
3. your circumstances are urgent, or you anticipate a fight, an application to the Supreme Court may be the best option.

What Happens If a Caveat is Lodged Incorrectly?

You can only lodge a caveat if you have a caveatable interest. It’s crucial to ensure that any caveat lodged is done so with reasonable cause and a genuine belief in having a caveatable interest. Furthermore, if the court finds that the caveat was lodged incorrectly, they will remove it from the Register. As well as this, they can also order you to compensate any person that suffered financial loss due to your incorrect caveat.

Otherwise, the consequences could be severe, both legally and financially. It’s always advisable to seek legal advice before lodging a caveat to ensure that it is done correctly and lawfully.

It is emphasised that determining caveatable interest is crucial before lodging a caveat, and merely having someone owe you money doesn’t automatically grant the right to lodge a caveat.

If you require assistance with determining if you have a caveatable interest in the property, lodging or withdrawing a caveat, please contact JHK Legal on 02 8239 9600 and we will assist you,