Caveats on property can affect your settlement

Caveats affect many property settlements each year, but the processes involved in removing a caveat remain poorly understood by some sellers and agents.

A caveat is an interest in land that’s lodged to protect the caveator’s interest. Absolute caveats prevent the Registrar of Titles from registering any “instruments”. Since a Transfer of Land is one such instrument, most caveats must be removed for a property to settle.

When caveats exist on the title, the seller’s settlement agent will take steps to have it removed. The simplest way to remove a caveat is for the caveator to lodge a Withdrawal of Caveat, so the seller’s settlement agent will send the caveator a letter asking them to do so.

If the caveator refuses to remove the caveat, the settlement agent will lodge a 21-day-notice with Landgate, and one of two things will happen:

  • If the caveator doesn’t take the matter to court within the 21 days, the caveat is removed.
  • If the caveator takes legal action and a court junction is issued, Landgate puts the Title into a Registrars Packet and moves it into Complex Dealings, so the caveat remains. Depending on the course of the legal proceedings, the property may not settle for a long time.

A recent settlement, for example, was delayed for nine months because of complications caused by a caveat on the Title. This case was a ‘mortgagee in possession‘ sale, and nine caveats had been lodged on the Title. At the request of the seller’s settlement agent, eight of the caveats were removed by their caveators – but one refused.

The caveator was owed a debt by the current owner, and commenced legal proceedings to seek payment of the debt owed. A court junction was issued, and the Title was put into a Registrars Packet by Landgate.

Since the Title was now in a Registrars Packet, the property couldn’t settle. The legal proceedings stretched on, and settlement was delayed by nine weeks. Such a long delay is highly inconvenient for all parties, and could have cost the seller thousands in penalty interest – but in this case, the Offer and Acceptance had specified that the seller could not be charged penalty interest.

To prevent long delays and costly penalty interest, be aware of the importance of dealing with caveats early in the process. Having caveats removed as soon as possible will reduce the risk of a delay in settlement.

Image by Gawler History via Flickr.