Do I have a Caveatable Interest?
A caveat (derived from the Latin word for ‘beware’) is essentially a warning or caution that can be registered on the Certificate of Title to a property to prevent any further dealings with that property.
Caveats are used by persons with an unregistered interest to prevent further dealings with the land until that person secures their interest.
You must have an interest in the land to lodge a caveat on a property.
It is not sufficient to lodge a caveat on a property to seek the recovery of a debt if the debt is unconnected with the land.
Scenario 1: The Charging Clause
Sandra is the sole director of a finance company Sandra Pty Ltd.
Sandra Pty Ltd provides loans to start-up businesses to finance new assets and business ventures.
Benjamin has just started up a new company, Benjamin and Co Pty Ltd.
As Benjamin requires additional capital to finance his start-up business, Benjamin enters into a loan agreement with Sandra Pty Ltd.
The loan agreement includes a charging clause that expressly charges any property of Benjamin with the performance of his obligations (to repay the loan) under the loan agreement.
The charging clause provides that any legal or beneficial interest in assets owned by Benjamin is charged in favour of Sandra Pty Ltd.
Benjamin fails to meet the repayments of the loan and does not respond to the letter of demand provided by Sandra Pty Ltd
Does Sandra Pty Ltd Have a Caveatable Interest?
Yes – Sandra Pty Ltd has a caveatable interest.
The charging clause included in the loan agreement provides Sandra Pty Ltd with the status of a secured creditor or equitable mortgagee by providing security over the property for the debt owed to her.
The caveat will prevent Benjamin from selling or further encumbering the property while the caveat is in place.
Scenario 2: The Property Settlement
James and Paula have been in a de facto relationship for seven years.
Paula purchased an apartment 6 months before she entered into a relationship with James.
After three months, James moved into Paula’s property with her.
James and Paula contributed equally to the mortgage repayments and general upkeep of the residence.
James and Paula’s relationship has now broken down and James has moved in with his parents.
James is worried that Paula may sell the property.
Does James Have a Caveatable Interest?
Yes- James has a caveatable interest in the property.
As James is not registered on the property, Paula can sell or refinance the property without James’ consent.
As James has contributed to the property financially, he has a caveatable interest in the property.
Generally, if a caveat is registered on the property, Paula will not be able to sell the property until the caveat has been withdrawn.
James may agree to withdraw the caveat as part of the property settlement
Scenario 3: The Property Developer
Huan purchased a property near the beach valued at $600,000 with the intention to develop the property and sell it with the view of making a profit.
Huan did not have enough funds to purchase the property so he approached Jason and asked to borrow $200,000.
A verbal agreement was entered between Huan and Jason, that Jason would provide $200,000 to Huan to purchase the property, and Huan would share 40 per cent of the profit upon the sale of the property.
Huan did not redevelop the property.
Jason believes that Huan has wrongfully used the money that he lent him and would like his money back.
Does Jason Have a Caveatable Interest?
No – Jason does not have a caveatable interest.
An agreement to share in the profits on the resale of land does not in itself establish a caveatable interest in the property.
A loan in the absence of an intention to give the caveator security over the land does not confer on the caveator an interest sufficient to support a caveat (Simons v David Benge Motors Pty Ltd  VR 585).
If Jason had provided the money to Huan as a loan to establish a security, it may give rise to a caveatable interest in the property.
As you will see from the above examples, a caveat can provide you with temporary protection of your interest in land by preventing any further dealings to occur concerning that land.
It is not always clear when you may have a caveatable interest.
If a caveator is found to have wrongfully lodged a caveat, they will be liable to compensate the person suffering pecuniary loss.
It is therefore critical to obtain legal advice if you suspect you may have an unregistered interest in land.
If you would like to know more about caveats and whether you may have a caveatable interest, contact us at Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.