CaveatA purchaser of real estate, will acquire what is known as an "interest" in the property purchased. However, a purchaser will not be the legal owner of the property until their interest is registered with the Land Titles Office of Victoria. This means that there is a risk that someone else could register their own interest in the property before the purchaser registers theirs. By lodging a caveat a purchaser can prevent others from registering interests ahead of theirs.
What is a caveat?The word caveat means beware, and the lodging of a caveat over a property is a way telling anyone who wants to deal with the property to be aware of the fact that someone else's interest already has priority. In other words, a caveat is a written warning to anyone who checks the Certificate of Title of the property that the person who lodged the caveat (known as the "caveator") has an interest in it. The Registrar of Titles cannot deal with the property without first notifying the caveator.
Who can lodge a caveat?
When a purchaser signs a contract to purchase real estate, 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.
It is best to have the caveat lodged by a lawyer so that advice can be obtained
as to whether a caveatable interest actually exists, whether there are any
contractual prohibitions on the lodging of a caveat, and whether further registrations to be made on the
caveator's behalf may be affected (a carelessly lodged caveat could prevent a purchaser's
own Transfer of Land from being registered or cause a lender to refuse to
provide funds on settlement day).
When should a caveat be lodged?
A caveat should be lodged as soon as a caveatable interest is acquired (usually as soon as the purchaser's offer has been accepted by the vendor of the property).If a caveat has not been lodged immediately after the purchase, it should be lodged as soon as there is a danger that another party may attempt to register an interest in a property.
Sometimes a real estate contract will prohibit the lodging of a caveat, and so
legal advice should be sought before the caveat is lodged.
How much does it cost to lodge a caveat?A purchaser who lodges a caveat will have to pay the Land Titles Office a registration fee of approximately $70.90. If the caveat is lodged through a lawyer a fee will be charged for legal advice, preparation of the caveat, and the actual lodging of the caveat at the Land Titles Office (usually $110).
What are the risks if a caveat is not lodged?The risk in any particular case depends on the individual circumstances. Here are some examples of problems that could be dealt with by lodging a caveat:
If a person with a competing caveatable interest lodges a caveat and gains priority ahead of a purchaser, the purchaser may incur considerable time and expense in ensuring that the caveator's interest in the property is dealt with and eventually disposed of.
The lodging of a caveat by a person with a competing caveatable interest
could force a purchaser to delay settlement. This could have a flow-on
affect if the purchaser's loan expires and the purchaser cannot obtain the
finance to complete the purchase.