Can you lodge a caveat over the property of someone who owes you money?

In brief - You need a caveatable interest in property in order to lodge a caveat

There is legislation in the Australian states and territories regulating the systems for lodging caveats.

What is a caveat?

One of the first things I remember learning at law school is "caveat emptor" - "buyer beware".

And caveats do just that - they are essentially red flags that serve as a warning sign for potential purchasers of a property that someone out there is claiming an interest in a property. 

The legislation which regulates the systems for lodging caveats in the different Australian states is set out at the end of this article.

When can you lodge a caveat?

One of the questions that I get frequently from clients is "Can I lodge a caveat?" More often than not, clients ask this question when someone owes them money.

Unfortunately, you cannot lodge a caveat whenever you feel you have been wronged. In fact, there are penalties for lodging a caveat without reasonable cause. In order to lodge a caveat, you must have what is known as a "caveatable interest". 

A caveatable interest means that a person has a current legal or equitable interest in land. Examples include:

• Purchasers of a property under a Contract for Sale of Land
• Agreements with a customer for the sale of goods or the provision of services, and the agreement includes a clause whereby, as security for obligations under the agreement, the customer charges all of its legal and equitable interest (both present and future) of whatsoever nature held in any and all Real Property
• Mortgagees

This is not by any means an exhaustive list.

It is possible to exclude a right to lodge a caveat. For example, a Contract for Sale of Land may include a Special Condition that specifically removes the purchaser's right to lodge a caveat.

The interest which is claimed to give rise to the right to lodge a caveat must exist at the time of lodging the caveat, that is, it cannot be an interest that can only arise in the future.

How do you lodge a caveat?

In NSW, the Land and Property Information Office (LPI) provides the form which you must fill in and lodge.

The form requires you to set out:

• The details of the property that you claim to have an interest in
• The details of the registered proprietor of the property
• The nature of the interest that you claim to have and how it came about

The form must be signed and your signature witnessed. The document is in the form of a statutory declaration. There are serious consequences for signing a false declaration. You should always speak to your legal advisor before lodging a caveat.

Upon paying the relevant filing fee, the caveat will be lodged at the LPI. Once lodged, the caveat will show on the title for the property for all the world to see.

How can you challenge a caveat?

There are a number of ways that a caveat can be removed. The most common way that I have come across is through a Lapsing Notice. A Lapsing Notice is issued by the owner of the property and then served on the person/party who has lodged the caveat (known as the caveator).

The caveator has 21 days from the date of service to seek an order from the Supreme Court of NSW for an order extending the operation of the caveat. If an order is granted, it must be lodged with the LPI before the 21 day period is up.

If no steps are taken by the caveator before 21 days are up, the caveat will lapse, that is, it will fall off the title.

Legislation governing caveats in Australian states and territories

Australian Capital Territory - Land Titles Act 1925 (ACT)

New South Wales - Real Property Act 1900 (NSW)

Northern Territory - Land Title Act 2000 (NT)

Queensland - Land Title Act 1994 (QLD)

South Australia - Real Property Act 1886 (SA)

Tasmania - Land Titles Act 1980 (TAS)

Victoria - Transfer of Land Act 1958 (VIC)

Western Australia - Transfer of Land Act 1893 (WA)

This article won a Mondaq Top Communicator Award for the most popular article in Australia for the month of July 2015.