Breach Of Commercial Contract Explained — What Business Owners Should Know

If you have unfortunately found yourself in the middle of a land dispute, it won’t be long before you turn to the voice of others for support. You will often hear people eagerly suggest, “Why not just register a caveat against their land…that will make them pay?” But is it really that simple? The answer, invariably, is, it is not.

Caveats, a legal tool often suggested to safeguard interests in land, are more complex than they might initially appear. While some may advise registering a caveat against a property as a quick solution to secure payment or enforce a claim to a legal or equitable estate or interest in the land, the laws governing caveats are rather intricate. 

A caveat, which is, in essence, a statutory injunction, can have significant consequences not just for the landowner whose land is being burdened by the caveat, but also for third parties like mortgagees. In this blog post, we’ll explore the intricacies of caveats, their proper use and the potential risks, emphasising the importance of understanding the legal implications before taking such a serious step.

Understanding the complexities of caveats — what landowners need to know before lodging

For many prospective buyers, a caveat serves as a warning sign. It’s a legal way to put a hold on the property until you finish buying it. A caveat may only be lodged to protect proprietary interests in land, and a wide variety of legal or equitable estates or interests in land have been held to be capable of supporting a caveat. However, a caveat must not be lodged as a bargaining chip, without legal basis or for an improper purpose.

A caveat is akin to a statutory injunction, designed to preserve the status quo of the land title register as it relates to the land of the landowner. 

A person or entity who lodges a caveat is called a ‘caveator’. 

The big risk with caveats is that whilst a Court grants a typical statutory injunction, a caveat is lodged by a caveator, a person who can easily get it wrong.

Laws about caveats can also be incredibly complex and vary by state — another hurdle many landowners run into without the guidance of a legal professional.

Lodging a caveat against someone’s land is a very serious step, as it, virtually, freezes the land title register in respect of the landowner’s land, thereby prohibiting the landowner from selling their land (or registering any other interests on title that may affect the caveator’s claimed interest in the land), until the caveat is withdrawn, removed, lapses or is cancelled. 

A caveat not only affects the landowner, but it also affects anyone else who has an interest in the land, and as most people have mortgages, a caveat on title may make a bank very nervous and unhappy about the landowner’s title suddenly being encumbered by a caveat, or it may impact on the landowner’s ability to refinance if a caveat is present on the title of the land. 

The caveator must, therefore, be very careful to ensure it has a ‘caveatable interest’, that is, an interest in the land that the registration of a caveat may lawfully protect (and answering this question is by no means simple, hence why caveats are heavily litigated before the Courts). 

If the caveator gets it wrong and lodges a caveat without reasonable cause, a Court may order the caveator to compensate anyone who has suffered loss or damage, as well as exemplary damages (which is a form of punitive damages designed to punish the caveator and deter others from engaging in any careless or reckless conduct).

Why lodge a caveat in the first place? 

The primary purpose of lodging a caveat is to allow time for the parties to apply to the Court to enforce or determine legal or equitable estates, or interests, in the land before the caveat automatically lapses (but even if the caveat lapses, it does not mean that the caveator is no longer liable for having lodged the caveat in the first place).

If a caveator does not want a caveat to lapse, the caveator must start a proceeding in a Court of competent jurisdiction to establish the interest claimed under the caveat during either of the following periods, as the case may be:

• if the caveatee has served an appropriate notice on the caveator — within 14 days after the notice is served on the caveator; or
• otherwise, within three months after the lodgement of the caveat.

A non-lapsing caveat is slightly different in that it does not automatically lapse and basically just stays registered on title (and non-lapsing caveats are not uncommon, especially where the caveatee has given a consent to the registration of a caveat against their property), but it is possible to have these removed as well in appropriate circumstances.

The balance of this article explores the rights of the landowner, known as the ‘caveatee’, to have a caveat removed by Court order.