A caveat can protect a legal or equitable interest in NSW property, but it cannot simply be used to freeze someone's assets. We explain when a caveat may be appropriate, how it works and the risks of lodging one without a proper basis.
A caveat can be an important way to protect an interest in property, but it is not something that should be lodged simply because you are owed money or are involved in a dispute with the owner.
In New South Wales, a caveat is recorded on the title to land to protect a claimed legal or equitable interest in that property.
Its practical effect can be significant. Depending on the terms of the caveat and the dealing proposed, it can prevent certain transactions from being registered against the title without the caveator's consent or until the caveat is removed or lapses.
But before lodging one, you need to establish that you actually have a caveatable interest.
Lodging a caveat without reasonable cause can expose you to a claim for compensation.
So what does a caveat actually do, when might you need one and when should you avoid lodging one?
A caveat is a notice recorded on the title of a property.
NSW Land Registry Services describes a caveat as a statutory mechanism that can prevent the registration of dealings affecting the title and alerts anyone conducting a title search that another person or organisation claims an interest in the property.
The person lodging the caveat is called the caveator.
Under section 74F of the Real Property Act 1900 (NSW), a person who claims a legal or equitable estate or interest in land may lodge a caveat with the Registrar-General.
That requirement is fundamental.
A caveat is not simply a way of freezing someone's property because there is a disagreement.
You need an interest in the land itself that the law recognises as capable of being protected by a caveat.
A caveat can prevent particular dealings with a property from being registered where those dealings would affect the interest claimed in the caveat.
Section 74H of the Real Property Act provides that, while an effective caveat remains on title, the Registrar-General must not register certain dealings prohibited by the caveat without the caveator's written consent.
Depending on the terms of the caveat, this may affect dealings such as:
A caveat does not necessarily stop every possible dealing with the property.
Its effect depends on the interest claimed, the wording of the caveat and the particular dealing being lodged.
There are also dealings that may be registered despite an existing caveat in circumstances set out in section 74H of the Act.
This is usually the most important question.
To lodge a caveat under section 74F, you need to claim a legal or equitable estate or interest in the land.
It is not enough simply to say:
Those facts may be relevant, but whether they create a caveatable interest depends on the legal basis of the claim.
The interest claimed in the caveat must correspond with the legal or equitable interest you actually assert.
This is why obtaining legal advice before lodging a caveat is important.
There are a number of circumstances in which a caveatable interest may arise.
Common examples include the following.
Once contracts have been exchanged, a purchaser may acquire an equitable interest in the property before becoming the registered owner.
A purchaser's caveat may therefore be used in appropriate circumstances to protect that interest until settlement.
NSW Land Registry Services expressly identifies a Purchaser's Caveat as a means of protecting the purchaser's equitable interest before the transfer is registered.
This may be particularly relevant where:
Whether a purchaser's caveat is necessary should still be considered in the context of the transaction.
Sometimes money is lent on the understanding that the lender will have security over a particular property, even though a formal registered mortgage was not completed.
Depending on the agreement and circumstances, this may give rise to an equitable mortgage or another equitable interest capable of supporting a caveat.
The important issue is not simply that money is owed.
There must be a legal connection between the debt and the property.
A general unsecured debt does not ordinarily create an interest in the debtor's land simply because the debtor owns property.
This situation commonly arises between:
For example, one person may have contributed to the purchase price, mortgage or substantial improvements even though the property was registered solely in another person's name.
Depending on the circumstances, those contributions and any agreement between the parties may give rise to an equitable interest, including through trust principles.
But contributions do not automatically mean there is a caveatable interest.
The legal basis for the claimed interest needs to be identified before the caveat is lodged.
An enforceable option to purchase land may, depending on its terms and circumstances, give rise to an equitable interest capable of protection.
NSW Land Registry Services specifically recognises that options affecting Torrens Title land can raise issues concerning whether protection should be obtained through the land title system.
Again, the terms of the agreement matter.
A person may have a beneficial or equitable interest in property even though they are not the registered proprietor.
For example, property may have been acquired or held in circumstances giving rise to:
Where a genuine equitable interest in the land exists, a caveat may sometimes be appropriate to protect that interest while the dispute is resolved.
These claims can be complex and should be assessed before a caveat is lodged.
Possibly, but not simply because you were married or in a de facto relationship.
A relationship breakdown does not automatically create a caveatable interest in every property owned by the other party.
Likewise, the fact that you intend to make a property settlement claim under the Family Law Act does not necessarily mean you have a caveatable interest capable of registration under NSW property law.
There may, however, be circumstances in which a spouse or former partner has an independent legal or equitable interest in the particular property.
For example, there may be:
The question is not simply whether the property might ultimately be included in a family law property settlement.
The question for the caveat is whether there is a presently identifiable legal or equitable interest in that land.
If the purpose is to prevent a property being sold or dealt with during family law proceedings, there may also be other remedies available through the Federal Circuit and Family Court of Australia.
Usually not on that basis alone.
A debt and an interest in land are different things.
If someone owes you $100,000 and also owns a house, that does not automatically give you an interest in that house.
There may be a caveatable interest if, for example, the loan agreement created security over the property or the circumstances gave rise to an equitable mortgage.
But an ordinary unsecured creditor generally cannot use a caveat merely as leverage to force payment.
The legal basis of the property interest needs to be established.
Only if you have an appropriate caveatable interest.
This is an important distinction.
A caveat may have the practical effect of preventing registration of a sale or another dealing, but that is a consequence of protecting an existing legal or equitable interest.
The purpose of the caveat system is not simply to stop a transaction because you object to it.
If you do not have a caveatable interest, another remedy such as an injunction or court order may need to be considered.
No.
A caveat does not determine ownership.
It records the fact that the caveator claims a legal or equitable interest and can protect that interest from being defeated by certain dealings while the issue is resolved.
The Registrar-General does not determine whether the caveator ultimately owns the interest claimed.
Section 74Q of the Real Property Act expressly provides that the Registrar-General is not required to be satisfied that the caveator is in fact entitled to the estate or interest claimed, beyond assessing whether the caveat complies on its face with the statutory requirements.
If the claimed interest is disputed, the matter may ultimately need to be determined by a court.
The caveat is recorded against the title.
Anyone conducting a title search can then see that the title is affected by the caveat.
If a dealing is later lodged that is prohibited by the caveat, the caveat can prevent registration unless:
The registered owner can also take steps to challenge a caveat.
Yes.
A registered proprietor or another eligible person can apply to NSW Land Registry Services for a lapsing notice.
Once the notice is properly served, the caveator generally has 21 days to obtain an order from the Supreme Court of NSW extending the operation of the caveat and lodge that order with the Registrar-General.
If the caveator does not do so, the caveat can lapse.
This means lodging a caveat is sometimes only the beginning of the dispute.
If the caveat is challenged, urgent Supreme Court proceedings may be required to preserve it.
Yes.
The Real Property Act provides mechanisms for applications to the Supreme Court concerning caveats, including applications to extend their operation or have them withdrawn.
Where a lapsing notice has been served, the timeframe can be short.
Anyone who receives a lapsing notice should obtain legal advice immediately rather than waiting until the 21-day period is close to expiring.
There can be significant consequences.
Section 74P of the Real Property Act provides that a person who, without reasonable cause:
may be liable to compensate a person who suffers financial loss because of that conduct.
The potential loss can be substantial.
For example, an improperly lodged caveat could interfere with:
This is why a caveat should not be lodged merely to create negotiating pressure.
Before lodging one, the legal interest and the wording of the caveat should be carefully considered.
There is no single answer that applies to every caveat.
Some caveats can remain on title until they are withdrawn, lapse or are removed.
Others are designed to lapse on a particular event.
For example, NSW Land Registry Services explains that a Purchaser's Caveat can lapse when the purchaser's transfer is registered at settlement.
A caveat may also become subject to a lapsing notice or court proceedings.
The particular type of caveat and the circumstances therefore need to be considered.
Not necessarily.
The Real Property Act contains exceptions allowing certain dealings to be registered despite a caveat.
In particular, a caveat lodged after an existing registered mortgage may not necessarily prevent the mortgagee from exercising its power of sale.
NSW Land Registry Services specifically notes that section 74H allows certain mortgagee dealings to proceed despite the presence of a caveat, depending on the circumstances and terms of the caveat.
A caveat should therefore not be assumed to provide complete protection against every dealing affecting a property.
A caveat is not simply an administrative form.
The most important parts are usually:
An incorrectly drafted caveat may fail to protect the interest you are trying to preserve or may expose you to unnecessary risk.
For that reason, legal advice should generally be obtained before lodging one.
Do not assume that the caveat is valid simply because NSW Land Registry Services has recorded it.
As noted above, the Registrar-General is not required to determine whether the caveator ultimately has the interest claimed.
If your property has been caveated, you should obtain advice about:
Timing can become particularly important where a settlement or refinance is already scheduled.
A caveat is a powerful mechanism for protecting a genuine legal or equitable interest in NSW property.
But it is not a general-purpose way of freezing someone's assets or securing an ordinary debt.
Before lodging a caveat, you need to identify the specific interest you claim in the land and the legal basis for that interest.
If you lodge a caveat without reasonable cause, you may be exposed to a claim for compensation.
Urban Law Group advises clients about lodging and removing caveats, property ownership disputes, equitable interests, purchaser's caveats and property issues arising between family members or following relationship breakdown.
We can also act where a caveat is affecting an urgent property sale, refinance or transfer.
This article was authored by Urban Law Group family lawyer Suna Ozcan. Suna has also presented to the legal profession through UNSW Edge alongside Katrene Halteh and Charlie Pollock on property law and family law rights, including the practical issues that arise when ownership, equitable interests and relationship breakdown intersect.
This article contains general information only and is not legal advice. Whether a caveatable interest exists depends on the particular facts and legal arrangements concerning the property.