Monday, 11 November 2013

Caveats over property: Not hard to register but they can be costly if wrongly done

Let's start with what a caveat is.  A caveat is a notation on the title to a property by a person who claims that they have an "interest in land".  It is recorded with "Land & Property Information (NSW)" and acts to stop the proprietor from dealing with the land in any way.  Examples of those with interest in the land are a purchaser of land who can place a caveat pending settlement, a lessee, or a person who has contributed to the purchase price of the property to stop the proprietor selling without him/her getting back their contribution.  Recording the caveat consists of filling out the right form, which is a brief document, and paying the necessary fee.  A fairly quick and easy process.

But the caveator must have "an interest in the land" and this is sometimes (or often) abused.  In the case of Pascoe & Robinson (as Trustees for 124 Tennyson Rd Gladesville) v Michael James & Ors, decided last week, the Supreme Court decided that the defendants had done exactly that - they had lodged "unmeritorious" caveats over the land in question.  A caveator is meant to lodge a caveat only with "reasonable cause" and where he fails to do so damages can be awarded against him/her.

Messrs Pascoe and Robinson had attempted to sell the land in question but were blocked due to the caveats put in place by the defendants.  Pascoe and Robinson claimed that due to these unmeritorious caveats, they had suffered loss of interest due to the delay they suffered in receiving the proceeds of the sale as well as additional legal costs.

Judge Slattery found that the defendants were liable for the damages suffered by the plaintiffs.  This, the Judge said, was based on the failure of the various caveators, as alleged suppliers of services, to deal with the registered proprietors in an attempt to resolve the issue of why the caveats were put in place.  The defendants had also failed to explain the basis for their claim to have an equitable interest in the property.  They made a vague assertion that their interests were based on invoices but could not sufficiently link these to the property.  The Judge found that the defendants had no caveatable interest, had no actual belief that there was a caveatable interest in the Land, and had no reasonable grounds for holding such a belief.

The defendants were ordered to pay the plaintiffs about $8000 in lost interest and about $38000 in costs.  They probably got off lightly. 

Caveats can be a useful tool in protecting the interests of those who have legitimate claims to some interest in property, but they should be thought about carefully before being recorded.  They are often lodged by people claiming an interest in land merely so as to frustrate the proprietor and in circumstances where there is absolutely no link to the land. 

Before lodging caveats be certain that you do in fact have a 'caveatable interest' or interest in the land.  If you do not, you, like Pascoe and Robinson may find yourself facing an order to pay damages and legal costs.

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