Caveats protect his/her interest in the property before settlement and ideally should be prepared by a lawyer for correct lodgement. Caveats are generally lodged by lawyers to protect a purchaser’s interests in a property between the sale and the settlement of the property to avoid the property being sold to another purchaser. Once a caveat has been successfully lodged, the property will not be able to be sold unless the caveat is withdrawn by the caveator.
What is a caveat?A caveat is a form of statutory injunction provided for under the Real Property Act 1900. A caveat can be lodged at the NSW Land & Property Management Authority and it is a written declaration that if someone checks the title of a property, the Register of Titles cannot act on their claim until they first notify the caveator.
Who can lodge a caveat?The most common reason a caveat is lodged or a lawyer is instructed to lodge a caveat on your behalf is when contracts have been exchanged on property but the property has not yet been settled. The purchaser acquires what is known as a “caveatable interest”. This means that the purchaser is entitled to register a caveat to protect that interest. Other people who can lodge a caveat are buyers who have signed a contract to buy the same property. This can happen by mistake if two real estate agents sell the property to different purchasers. In this instance, the person who lodges the caveat first may have a principal claim to the estate. A bank lender may also lodge a caveat on a purchaser’s behalf to prevent the vendor from selling the property. A creditor may have a written agreement with the vendor by which the creditor is permitted to lodge a caveat to secure a loan. Alternatively, the creditor may have a court order allowing for the lodging of a caveat.
When should a caveat be lodged?You should consider lodging a caveat if you have an estate or interest in land that you cannot protect by registration of some other dealing, for example, a transfer or mortgage. This will safeguard you and provide protection against the property being sold to another purchaser by a vendor. A caveat should ideally be lodged a lawyer or the mortgage lender when an offer has been formally accepted by a vendor in writing and contracts have been exchanged. This should occur before the Certificate of Title and the Transfer of Land has been obtained to avoid another purchaser gaining priority over the purchaser.
Why should a caveat be lodged by a lawyer?If you instruct a lawyer to lodge a caveat on your behalf, they can do the necessary checks for you such as whether there will be any problems with lodgement. This may occur if a ‘caveatable interest’ does not exist, whether there is an existing caveat on the property or any other restrictions that may prevent the sale. If the caveat is not lodged, this could prevent a purchaser’s own Transfer of Land from being registered or cause a lender to refuse to provide funds on settlement day. In addition, if you lodge a caveat without reasonable cause, you are liable to liable to pay compensation to any person who suffers a financial loss as a result. Please contact our Property Law Team during business hours on 1800 770 780 if you require advice on lodging a caveat or buying or selling a commercial or residential property. We will provide you with more information about lodgement of caveats and ensure that the purchase or sale of your house runs smoothly. If you need any assistance with this topic, please contact us.
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