To Caveat or not to Caveat?

*Please note this is a general guide only and should not be used in place of obtaining our advice. Any references are relevant as of the date of posting.

To caveat or not to caveat?

When you purchase any type of real estate, you obtain (upon signing the contract of sale), what is known as an ‘interest’ in the property. Until this interest is registered with the Land Titles Office within your respective state, you are not the legal owner of the property.

In essence, this means that until settlement of the property, another party may be able to register their own respective interest in the property prior to you. The easiest way to prevent this from occurring, is by lodging a ‘caveat’ upon purchase of the property.

What is a caveat?

A caveat, which simply means ‘beware’, is a document that can be lodged by any person with a legal interest in a property. Its purpose is to notify any other parties that there is a registered interest over the property in question and acts as a warning to anybody who checks the Certificate of Title that a priority interest exists. This means that any dealings made concerning the property must be made known to the party that lodged the caveat.

Who can lodge a caveat?

There are two main categories of parties that are able to lodge a caveat:

A purchaser of real estate who has signed a contract of sale and therefore acquired a ‘caveatable interest’; and
A creditor (whom money is owed) that wants to prevent the vendor (seller) from disposing of the property in order to secure moneys owed.
When should a caveat be lodged?
Given that the costs of lodging a caveat (approx. $250 dollars) are minimal in comparison to the financial investment made when purchasing a property, a caveat should be lodged immediately upon acquiring a caveatable interest (i.e. immediately following the signing of a contract of sale). Prompt lodgement of a caveat eliminates any unnecessary risk and provides peace of mind to the incoming purchaser of a property that their investment is free from third-party claims.

What are the risks of not lodging a caveat

There are several inherent risks in not lodging a caveat, that are largely dependent on circumstances. Some examples of these circumstances include (but are not limited to):
where a vendor accidently accepts two offers for the same property, the legal owner of the property may then be decided by which purchaser lodges a caveat first. Failure to lodge first means the second purchaser may have to settle for mere compensation rather than obtain title to the property;
in a situation where a creditor is owed money by the vendor, they can lodge a caveat over a purchased property which prevents the incoming purchaser from registering their legal interest. Immediate lodgement of a caveat on behalf of the purchaser denies the creditor such a right; and
where a purchaser acquires a home loan and the lender wants to register the mortgage on the title of the property. Often this process delays registration of title unnecessarily and increases the ‘danger period’ for third-parties to register an interest in the property unless a caveat is lodged immediately.

How do I lodge a caveat?

Contact Merton Lawyers, who can lodge a caveat for you immediately upon receiving instructions.



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