A caveat means and implies a statutory inunction or a restraint which prevents the registration of a particular dealing with the real property which could affect the interest and ownership of the property in the existing format. The caveat also acts as a warning and a formal notice to the public at large that the land or the property in question carries a particular interest in the estate or the property at the behest of the person who lodged the caveat. It cautions the prospective interest bearer to be cautioned and beware of the priority interest existing in the property.
Interestingly, a lodgement of a caveat on the property effectively prevents the registration of further dealings including the alteration of an interest on the title of the property unless the caveat is formally withdrawn by the caveator; or the caveat lapses by time; or the caveator consents to a third-party registration that deals with the property’s title; or such a caveat is removed by the order of the court.
A caveat can not be lodged at a free discretion but only as per the scope of the Transfer of Land Act 1958 (Vic) to include a registered or equitable mortgage; or transfer; or purchase under an agreement for sale; or a tenant in certain circumstances; or a register proprietor; or contractual rights. Lodgement of a caveat without a reasonable cause is a serious matter. In case it is determined (by the court) that the caveat was lodged incorrectly, the caveat will be removed and compensation to a person suffering a financial loss because of such wrong caveat shall also be allowed.
The caveat can be removed in two different manners. One way is to file an application with the Registrar of Titles in writing. The application to remove the caveat is required to be supported by a certificate from an Australian Legal Practitioner who must form an opinion that the caveator does not have the estate or interest claimed by the caveator. Once, the notice for removal of the caveat is received, the Registrar must give a notice to the caveator that the caveat will lapses on a day specified in the notice unless in the meantime, the caveator abandons the application by providing the Registrar with written notice; or provides the Registrar with a written notice indicating that the court proceedings are no foot to substantiate the caveator’s claim. The caveat will lapse if the caveator does not commence a proceeding to substantiate the claim or in case the caveator commence the proceedings, but the court rejects the claim or proceedings are otherwise discontinued, withdrawn, or struck out.
The person adversely affected by the lodgement of caveat on the property is entitled to bring proceedings in the Victorian Supreme Court against the caveator and insist that the caveat was wrongly lodged and be removed. In such a situation where proceedings are initiated in the Supreme Court, the caveator carries the burden of establishment as to the validity and correctness to the caveat on the property. The caveator is required to establish that the balance of convenience and the legality of the interest in the estate or the property requires the lodgement of caveat to continue. The Supreme Court will weigh the various factors and the claims of varying parties to establish the prima facie interest of the caveator in the property. Interestingly, the assessment is real and in the process of such assessment, the parties are required to establish their claim and counter claim. As is apparent, if the caveat is allowed to remain on the title of the property, the same would frustrate the plans to make any changes in the title and interest of the property. It would delay the settlement of the sale of the land or the property. In normal practice, the court seeks an undertaking from the caveator to pay compensation to any affected person by the operation of the order to maintain the caveat.
There is a common misconception that the builders/contractors are entitled to lodge a caveat over the property for their unpaid invoices and claim an interest in the property because of the work. Cautiously, as the law stands, a builder/contractor is not entitled to claim an interest in any land for the purposes of transfer of the land act. The application of Domestic Building Contracts Act specifically bars the lodgement of caveat merely for the work executed on the property.