Caveats Series – Part 1: What is a caveat?

Caveats are one of the most recognisable instruments when it comes to land transactions. They are also one the most misunderstood.

What is a caveat?

A caveat is a form of registration which is registered on the Certificate of Title to a property for the purposes of notifying the world at large of an interest in that property. Caveats can be used to prevent any transaction on a property, or to ensure that any dealing takes place subject to the interest notified in the caveat.

In Western Australia, caveats are governed by the Transfer of Land Act 1893 (WA) (TLA). Section 137(1) of the TLA authorises a party who is claiming an “estate or interest” in land to lodge a caveat in an approved form.

Types of caveats

The impact a caveat can have on an owner depends on the caveat being lodged. There are three traditional types of caveats

  1. an absolute caveat which stops any person, including the registered proprietor (owner), from dealing with the property;
  2. a subject to claim caveat which allows an owner to deal with the property, provided that any new dealing recognises that the caveat is to remain registered (these are useful, for example, for caveats lodged to protect leasehold interests); and
  3. a notice caveat which requires notice to be given to the caveator before any instrument can be lodged (this allows the caveator to take steps to protect their interest if needed).

Since the infamous “Nigerian Property Scams”, a fourth type of caveat has emerged, being an improper dealings caveat. This type of caveat is used to prevent transactions taking place in relation to an owner’s property, particularly if that owner is overseas, as this type of caveat prevents any transactions from taking place until the owner presents in person at Landgate to remove the caveat.

Lodging the right caveat

When lodging a caveat, it is important to lodge the right type of caveat, otherwise you may be required to withdraw the caveat. This is because a caveator may not lodge a caveat which goes beyond the legitimate claim necessary to protect the caveator’s rights (DCT v Corwest Management Pty Ltd [1978] WAR 129 at 131). For example, if you are attempting to charge a property as security, an absolute caveat would be appropriate, but if you are only trying to protect a lease, a subject to claim caveat would be appropriate.

To illustrate this in a practical context, in the case of Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14, the Supreme Court of Western Australia ordered the removal of an absolute caveat which had been lodged to protect the interest of a beneficiary under a unit trust on the basis that a notice caveat would have been sufficient to protect the caveator’s rights.

The Court’s logic was that the trustee was entitled under the trust deed to sell property and an absolute caveat lodged by a beneficiary was an inappropriate restraint on the legitimate powers of the trustee. Whilst the caveator was given leave to lodge a notice caveat, the Court ordered that the caveator pay the costs of the owner as the initial absolute caveat had been ordered to be removed, meaning that lodging the wrong type of caveat proved to be a very expensive mistake for the caveator.

If you have an interest in property and wish to protect it by lodging a caveat or need any other assistance regarding caveats, please contact Tim Kennedy on (08) 9321 3755.

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.