Caveats Explained: What They Mean For Your Settlement

Caveat: Rezzi

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Caveats affect many property settlements each year, but the processes involved in removing a caveat remain poorly understood by some sellers and agents.

What is a caveat?

A caveat is a notification on a title that warns prospective purchasers, mortgagees and others who propose to deal in the land that a third person (normally the person lodging the caveat, the caveator) has some right or interest in the land. An Absolute caveat prevents the Registrar of Titles from registering any further instrument on the title. Since a Transfer of Land is one such instrument, most caveats must be removed for a property to settle.

Can you buy a property with a caveat on it?

The strict answer to this question is yes, but in practise that rarely happens. In the case of Absolute caveats, Landgate has been prohibited from lodging any further instrument on the title (a Transfer of Land for example) until the caveat is removed. In other words, the property won’t settle until the caveat is removed.

Impact and delays caused by caveats

Caveats can significantly impact property transactions, often leading to delays and complications. When a caveat is lodged on a property’s title, it serves as a warning to potential buyers, mortgagees, and others interested in dealing with the land. The presence of a caveat indicates that a third party, known as the caveator, holds a right or interest in the property.

One of the main consequences of a caveat, especially an Absolute caveat, is the prevention of further instrument registration on the title. This means that essential documents like a Transfer of Land cannot be registered until the caveat is removed. As a result, the settlement process for the property is put on hold until the caveat issue is resolved.

Delays caused by caveats can be frustrating and costly for all parties involved. They can disrupt timelines, jeopardize financing arrangements, and even lead to contractual breaches. In some cases, legal proceedings may be initiated by the caveator, resulting in further prolongation of the settlement process.

In essence, the presence of a caveat poses a significant barrier to the settlement process. Without removing the caveat, the property cannot proceed with the necessary legal and financial transactions required for the transfer of ownership. As a result, the settlement remains in a state of limbo until the caveat is properly addressed and lifted.

How are caveats removed?

There are many ways to have a caveat removed from a title. The simplest is for the caveator to lodge a Withdrawal of Caveat.

If the caveator refuses to remove the caveat, the settlement agent will lodge a 21-day-notice with Landgate, and one of two things will happen:

  • If the caveator doesn’t take the matter to court within 21 days, the caveat is removed.
  • If the caveator takes legal action and a court injunction is issued, Landgate puts the Title into a Registrars Packet and moves it into Complex Dealings, so the caveat remains. Depending on the course of the legal proceedings, the property may not settle for a long time.

A recent settlement, for example, was delayed for nine months because of complications caused by a caveat on the Title. This case was a ‘mortgagee in possession sale’, and nine caveats had been lodged on the Title. At the request of the seller’s settlement agent, eight of the caveats were removed by their caveators – but one refused.

The caveator was owed a debt by the current owner and commenced legal proceedings to seek payment of the debt owed. A court injunction was issued, and the Title was put into a Registrars Packet by Landgate.

Since the Title was now in a Registrars Packet, the property couldn’t settle. The legal proceedings stretched on, and settlement was delayed by nine weeks. Such a long delay is highly inconvenient for all parties, and could have cost the seller thousands in penalty interest – but in this case, the Offer and Acceptance had specified that the seller could not be charged penalty interest.

To prevent long delays and costly penalty interest, be aware of the importance of dealing with caveats early in the process. Having caveats removed as soon as possible will reduce the risk of a delay in settlement.

How long does a caveat last?

Once a caveat is registered on a title it remains in place until either withdrawn by the caveator or through other means not attributable to the caveator.

The duration of a caveat’s validity depends on the actions taken by the caveator or external factors that may affect its status. As long as the caveat remains unwithdrawn or unaffected by other means, it will continue to exert its influence on the property title and any associated transactions.

How do you know if you have a caveat on your property?

Section 138 of the Transfer of Land Act requires the Registrar of Titles to notify the registered proprietor of a property when a caveat is lodged on their title. This notification is sent by normal post to the registered address of the proprietor. But if the owner has moved since purchasing the property and not had their registered address updated then they may not be aware of the existence of the caveat. If you suspect that a caveat has been registered on your title, purchase a title search from Landgate.

If you’re looking for professional assistance with property conveyancing in Perth or buyers agent services, we’re here to help. Request a quote or give us a call at the following number: 1300 001 358.
Our experienced team is ready to guide you through the process and provide you with the support you need for a successful outcome.

Peter Fletcher

Meet Peter Fletcher, a real estate expert with over 30 years of experience. As the Managing Director at Rezzi, Peter is a licensed settlement agent and real estate agent. His knowledge and expertise have been recognized in the industry, serving as a councillor and trainer for REIWA and AICWA. With Peter on your side, expect expert guidance and unwavering support throughout your property journey.