Article by Patrick Lynch, Head of Operations at Long Property
Recently, we’ve had to deal with caveats as part of both a purchase and refinance. Some staff had never heard the term, so we’ve provided education and thought clients might also find a benefit.
What is a caveat?
A caveat is a warning, lodged on a property title with the relevant Titles Office, that tells other parties a person has an interest in a property they own or are purchasing. Parties must have a legally recognised (‘caveatable’) interest in the property, to lodge a caveat. It effectively ‘freezes’ the title, preventing others from dealing with the property without the caveator’s knowledge.
Why lodge a caveat?
There are a few situations where it might be beneficial to lodge a caveat.
The most common is where you have signed a contract of sale to purchase a property, with settlement to happen later. You now have a ‘caveatable interest’, but don’t become the owner until settlement is complete. Therefore, a caveat can protect your interest, ensuring you are notified if anyone else tries to deal with the property without your knowledge or consent.
Other reasons for lodging a caveat might include:
- Where there is dispute between parties, e.g., on ownership
- A vendor or purchaser where the price is being paid in instalments and either is not the registered owner
- Anyone with right of access to the land
- Tenants under a (unregistered) lease
What are the risks?
Whilst there are benefits in lodging a caveat, it isn’t without risk of negative consequences. Legal disputes can occur, with considerable financial expense, if courts determine you didn’t have a caveatable interest.
Caveats can also delay property settlements, as the following recent examples show:
- The Lender identified that there was a caveat on a property being purchased, requesting confirmation that it would be removed prior to or at settlement. The client solicitor/ conveyancer was able to provide this.
- A client was refinancing their loan and one of the 2 borrowers had lodged a caveat on the property at the time of original purchase due to personal circumstances around residency. Before the Lender could complete settlement, the client had to engage their solicitor/ conveyancer to remove the (no longer relevant) caveat.
It is important to engage a solicitor or conveyancer, who can provide advice, details fees, prepare and lodge paperwork, assist with removing caveats, etc.
Homes for Homes
Recently, I heard about Homes for Homes, created by The Big Issue, working to end homelessness.
This revolves around a simple promise that a Vendor makes when selling a property – the owner registers with Home for Homes, who create a deed and lodge a caveat whereby 0.10% (tax-deductable) of the sale proceeds are donated at settlement. Funds are pooled and granted to community housing providers to build social and affordable housing.
Closing
As you see, there are benefits in lodging caveats – mainly protecting your interest in a property. Legal advice should always be sought from relevant professionals, such as solicitors or conveyancers, when it comes to property.
For any queries on the Lending side on caveats, arrange a conversation with Dan or Ian via:
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The Long Property blog provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Nothing in the Long Property blog constitutes legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
