What is a Caveat?

27 June, 2022 | Duncan Lang

Drawing from its Latin meaning “let them beware”, a caveat is an instrument lodged against a property’s title with the purpose of serving as a notice that the person lodging the caveat (or “caveator”) claims an interest in the property, even if they are not a registered owner.

In lodging a caveat, the registered owner of the property is prevented from selling, mortgaging, or dealing with the property until the caveator consents, or the caveat has been removed from the title. However, lodging a caveat does not create an interest in the land, it is a notice of the caveator’s claim to an interest and can be disputed by the registered owner.

How can you register a caveat?

A caveat can only be lodged by those who have a “caveatable interest” which, according to s138(1) of the Land Transfer Act 2017, is when the caveator:

1. Claims an estate or interest in the land, whether capable of registration or not; or
2. Has a beneficial estate or interest in the land under an express, implied, resulting or constructive trust; or
3. Is transferring the estate or interest in the land to another person to be held on trust; or
4. Is the registered owner of the estate or interest in the land; and

a. Has an interest different from that of a registered owner

b. Establishes that at the time the caveat is lodged there is a risk that the estate/interest may be lost through fraud.

If you believe you have a “caveatable interest” in a property, you should contact your lawyer about lodging a caveat against the property’s title. Consideration will need to be given to ascertain if you have a caveatable interest. Following which, your lawyer will arrange to have you execute documents to register the caveat.

Registering a caveat cannot be taken lightly however because if a caveat is registered without the caveator having reasonable cause to do so, this may make the caveator liable to pay compensation for any loss suffered because of the registration of the caveat.

When should you register a caveat?

Common situations where a caveat may be registered include:

1. A person has purchased a property and there is significant time period between signing the agreement and the settlement date, or a substantial deposit has been paid.
2. A purchaser wishes to protect their interest where a vendor is trying to cancel the agreement.
3. A person has lent money to another person and as security for that loan the borrower has signed an agreement to mortgage.
4. You have guaranteed a loan to someone else
5. You may have agreed with the lender that they could caveat your title

How can a caveat be removed?

The easiest way for a caveat to be removed from a title is for the caveator who lodged it to withdraw it in a similar manner to the lodging process, through the signing of an authority an instruction form authorising the caveat’s withdrawal.

If the registered owner believes the caveat ought to be withdrawn and the caveator does not agree to withdraw a caveat, the owner can apply to the Land Registrar to remove the caveat or have it lapse. The owner can also apply to the High Court to remove the caveat from the title.

Conclusion

If you have an interest in a property that you wish to protect, a suitable action may be to lodge a caveat. Alternatively, if you are a landowner and you believe a caveat has been wrongly lodged against your property’s title, you may be able to apply for this caveat to be removed.

We suggest that you seek advice from a property lawyer regarding your circumstances who can discuss your situation with you and explore the best ways to approach and help resolve your matter.

To schedule an appointment with Nathan, please contact litigation executive, Mikayla Sagar by email on Mikayla.sagar@smithpartners.co.nz or by phoning 09 837 6890