A caveat is a form of statutory injunction that prevents the registration of a dealing (e.g. transfer of land, mortgage etc.) until such time as certain conditions are met. In New South Wales, a caveat will be recorded on the folio of the Torrens Title Register for a specific parcel of land and can only be removed with the consent of the party that lodged the caveat (i.e. the caveator) or by Court order or by the caveat lapsing.

In NSW caveats are lodged with Land Registry Services and only by a caveator who claims to have a ‘caveatable interest’ in real property. Section 74F(1) of the Real Property Act 1900 (NSW) gives those people claiming to have a caveatable interest in property the right to lodge a caveat and states that:

“any person, who, by virtue of any unregistered dealing or by devolution of law or otherwise, claims to be entitled to a legal or equitable estate or interest in land under the provisions of this Act may lodge with the Registrar-General a caveat prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled”.

Some examples of caveatable interests include:

  1. Purchaser’s interest under an agreement of sale.
  2. An unregistered or equitable mortgage.
  3. An interest of a beneficiary under a trust.

It is critical that the nature of the claimed caveatable interest is described with precision in schedule 1 of caveat document that is lodged with Land Registry Services. The description must comply with the requirements of Schedule 3 of the Real Property Regulation (2014), which relevantly sates:

  1. The particulars of the nature of the estate or interest in land claimed by the caveator.
  2. The facts on which the claim is founded, including (if appropriate) a statement as to the manner in which the estate or interest derived.
  3. If the caveator’s claim is based (wholly or in part) on the terms of a written agreement or other instrument, particulars of the nature and date of that agreement or instrument and the parties to it.
  4. If the caveator claims as mortgage, charge or covenant charge, a statement of the amount of the debt or other sum of money charged on the land.

  1. It is not necessary to specify:
    1. Whether the estate or interest claimed is legal or equitable, or
    2. The quantum of the estate or interest claimed (except sad required in item 4), o r
    3. How the estate or interest claimed ranks in priority.

If the interest in the land does not adequately describe the precise interest (or claims an excessive interest) the caveat will be invalid. Further, by merely stating that a person has an “equitable interest” in the land will not comply with the regulations (see Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering [2005] NSWSC 880).

Removing caveats

There are three principle avenues to have caveat removed from the title to property:

  1. By consent;
  2. By court order; or
  3. By issuing a lapsing notice.

The most common process of having a caveat removed is by issuing a lapsing notice whereby once a caveator has been served with the lapsing notice, they have 21 days to commence proceedings in Court to extend the operation of the caveat. If proceedings are not commenced the caveat will lapse and be removed.

If proceedings are commenced in the Supreme Court of New South Wales the onus is on the caveator to prove that:

  1. Their claim of having a legal or equitable interest in the land “has or may have substance (section 74K of the Real Property Act 1900 (NSW)); and that
  2. The balance of convenience is in their favour.

The test to prove that the caveator’s claim “has or may have substance” has a low threshold, proving that they have a “seriously arguable case”. This test, according to Brereton J in Wu v Dardaneliotou [2008] NSWSC 1319, imports the same test familiar to the law of interlocutory injunctions. Critically, if the Court finds that there is no seriously arguable case, the issue of the balance of convenience does not arise, and the application is dismissed.

The test for the balance of convenience requires the Court to weigh the interests of the registered proprietor against those of the caveator. The caveator will have to prove that, on balance, it is more convenient for them to have the caveat extended than it is convenient for the registered proprietor to have the caveat removed.

If the Court is minded to extend the caveat it may do so until such time as it deems appropriate or until further order. If the Court dismisses the application the caveat will lapse and the registered proprietor is free to deal with the land to the extent that the caveat imposed restriction.

If a Court determines that the caveator’s application should be dismissed a registered proprietor may be entitled to compensation in certain circumstances. Pursuant to section 74P of the Real Property Act 1900 (NSW) an person who, without reasonable cause:

  1. Lodges a caveat with the Registrar-General under a provision of this Part,
  2. Procures the lapsing of such a caveat, or
  3. Being the caveator, refuses or fails to withdraw such a caveat after being requested to do so,

Is liable to pay to any person who sustains pecuniary loss that is attributable to an act, refusal or failure referred to in (a), (b) or (c) above compensation with respect of that loss.