What Is a Caveat on a Property Title?

Where caveats come from

Caveats are a creature of the Torrens title system. In NSW they are governed by Part 7A of the Real Property Act 1900. Each state has an equivalent regime — Victoria under the Transfer of Land Act 1958, Queensland under the Land Title Act 1994, and so on. The mechanics differ slightly, but the underlying purpose is the same: to give an unregistered interest-holder a way to protect their interest and force the issue.

What is a "caveatable interest"?

Only a legal or equitable interest in the land itself supports a caveat. A general debt or an unrelated commercial dispute does not. Typical caveatable interests:

• Purchaser under an unregistered contract for sale of the land.
• Beneficiary of an express, resulting or constructive trust over the land.
• Holder of an equitable mortgage or unregistered mortgage.
• Party with an option, right of first refusal, or pre-emption over the land.
• Party with a written agreement containing a charging clause over the land.
• Party entitled to specific performance of an agreement affecting the land.

A caveat lodged without a caveatable interest can be removed — and the caveator can be ordered to pay damages and costs.

The effect of a caveat

Once registered, a caveat prevents the Registrar-General from registering most dealings with the title (transfer, mortgage, lease) without notice being given to the caveator. The registered proprietor can still enter into a contract to sell, but cannot complete the transfer while the caveat sits on the register.

How a caveat is removed

There are four main ways a caveat comes off the title:

1. Withdrawal. The caveator voluntarily withdraws the caveat.
2. Lapsing notice. The registered proprietor serves a lapsing notice (in NSW, under section 74J). The caveator has 21 days to commence Supreme Court proceedings to establish the caveatable interest. If they do not, the caveat lapses automatically.
3. Court order. The registered proprietor applies to the Supreme Court under section 74MA (NSW) or its state equivalent. The court will remove the caveat unless the caveator can show a caveatable interest, a serious question to be tried, and that the balance of convenience favours keeping the caveat on.
4. Expiry or fulfilment. Some caveats are lodged for a limited purpose (for example, to secure completion of a contract) and are removed on completion.

Damages for improper caveats

Section 74P of the Real Property Act 1900 (NSW) — and its equivalents in other states — makes a caveator liable for compensation to any person who suffers loss as a result of a caveat lodged without reasonable cause. Damages can include lost sale, delayed settlement, interest on borrowed money, and legal costs. Lodging a caveat as a pressure tactic in an unrelated commercial dispute is a very expensive mistake.

Common caveat scenarios

• Off-the-plan purchases. Buyers often lodge a caveat to protect their interest under the contract until settlement.
• Private lending. Private lenders take an equitable mortgage and lodge a caveat to protect their security before registering a mortgage.
• Property developers. Where a developer holds a call option or a co-development agreement, a caveat protects that unregistered interest.
• Family and de facto disputes. A partner who contributed to a property but is not on title may lodge a caveat on the basis of a constructive trust — but the caveatable interest analysis is fact-specific and often contested.
• Deposit protection. A deposit paid before exchange can sometimes support a caveat, but only if the arrangement gives rise to an equitable interest in the land itself.