People often ask about buying a house with a caveat and how to lodge it into their property, as financial and legal matters here are involved. A caveat in real estate is an expression of interest in a property that stops any new deals from occurring in relation to a property.
The term caveat is derived from the Latin expression which means “beware” and is often considered a warning or a red flag for prospective buyers. This warns them that there is also another buyer who is interested in the property. The caveator, the person lodging a caveat, will provide details of their claim for them to be formally included in the contract with the caveat.
A concerned government body will then notify anyone who expresses interest in buying a house with a caveat. It is worth noting there are two types of caveats when one is buying a house with a caveat:
- Absolute Caveats:
These caveats do not allow any dealings to occur in a property until the caveat has been removed.
- Permissive Caveats:
These caveats allow dealings on the property if the caveator consents to the dealing.
Let’s discuss in this article what a caveat is and other factors that are relevant to the topic.
Who Can Lodge A Caveat?
When a person is interested in buying a house with a caveat, they acquire a “caveatable interest”. This means that the buyer is entitled to register a caveat to protect that interest. The word “interest” has to do with a circumstantial entitlement to real estate. While it can be difficult to define who can lodge a caveat, here is a list of people who can lodge a caveat:
1. Persons with an equitable interest in the land under a contract of sale
2. Sellers of the land who have received parts of the instalment for the purchase price, but are no longer registered as the owner
3. Buyers who pay purchase prices in instalments, but are also not a registered owner
4. Persons who have the right to access the land
5. Tenants under an unregistered lease
6. Persons who have signed a contract to buy the property
7. Creditors who want to prevent the seller from disposing of the property
8. Equitable mortgagees (lenders in a mortgage like banks)
9. The buyer’s partner
10. A Lessee (a person who holds the lease of a property)
11. Beneficiaries under a trust
12. Victims of fraud
While the persons above are entitled to lodge a caveat on a property, a lot of people still can’t. There is a common misconception that creditors can caveat a debtor’s property to secure the repayment of a debt, however, this results in several creditors exposing themselves to significant risks in the form of costly penalties.
This is because they have registered a caveat without having a caveatable interest. A caveat is merely a notice of a claim which may be valid or not and its validity has to be determined at some point. There are two main procedures for buying a house with a caveat and removing them:
- Removal of the caveat by applying to the Registrar General
- Removal of the caveat by Order of the Supreme Court
The caveator will be obliged to proceed to court and defend their caveatable interest for both instances. The costs for these court proceedings will usually follow, which means that if a caveator is unsuccessful in proving a caveatable interest, the costs will be claimed from them.
Buying A House With A Caveat: How To Register And Remove?
Lodging a caveat is not as simple as claiming it on a first-come, first-served basis on a property that a buyer is interested in. It is worth noting that a buyer must have a caveatable interest prior to registering a caveat as the buyer could be held liable for any financial losses that occur due to any activity that can deem a caveat unreasonable or unjust.
Extreme diligence and attention to detail must be paid to the preparation of necessary documents like names and numbers shown to the current title. When one has confirmed that they have a caveatble interest, they can speak with a solicitor to begin lodging their caveat.
A caveat lodged without merit can be withdrawn by the party who lodged it. This involves the owner contacting the lodger and outlining the failure of the claim and warning of incoming legal proceedings to remove at the cost and expense of the lodger.
A common ground to start is for the owner to lodge a lapsing notice with the Registrar of Titles in buying a house with a caveat and its removal. The Registrar then issues the lodger with a prescribed form giving them notice that unless proceedings are commenced at Court within a timeframe for an order of upholding the validity of the claim, the Registrar will write it off in the title.
When dealing with permissive caveats, the owner may attempt to contact the caveator and ask the concerned individual to withdraw their caveat or provide consent for them to sell their property. This may require full or an agreed reduced payment that satisfies the creditor’s claim, depending on the consented interest of the caveator.
Buying A House With A Caveat: Final Takeaways
One should be responsible and exercise due diligence before buying a house with a caveat like performing title searches on that property. This is usually done with your solicitor as part of the conveyancing process.
What’s more, lodging or withdrawing a caveat comes with associated costs. The amount that is paid differs in each state depending on where the individual resides. Generally speaking, if one finds a prospective property with a caveat, they’re going to have a difficult time purchasing that property.
Seeking Legal Advice With JB Solicitors
Caveats are lodged in properties for several reasons and exist for necessary purposes. Finding a caveat is not ideal and will prevent buyers from pursuing a property. Additionally, someone can lodge a caveat on one’s property and may ruin one’s plan of selling it in the future.
JB Solicitors has a wide range of lawyers who specialise in Property and Conveyancing for our clients who face legal matters like buying a house with a caveat. While it is unpleasant to consider the multiple financial expenses associated with these situations, our fixed-fee charges alleviate your financial concerns, allowing you to concentrate on your case.
Contact JB Solicitors today.