Dispute Resolution: I am owed money, can I lodge a caveat against the debtor’s land?
The title to this article is a question we regularly get asked when we’re approached by clients to recover a debt due to them. Unfortunately, in most circumstances the answer is no. In this article, we will explore the circumstances in which you can lodge a caveat against a property when you’re owed a debt, what a caveat is, what they can be lodged for, what they cannot be lodged for and the consequences of lodgement of an invalid caveat.
A land caveat
A caveat is a document that is lodged in Western Australia through the office of Landgate against a specific piece of land and it encumbers the title to the property. That is, it prevents or acts as a warning to dealings on that title. There are five types of caveats:
- An absolute caveat that prevents any dealing whatsoever on the land after the caveat is lodged;
- A subject to claim caveat means that any dealing lodged after the caveat is lodged is subject to the caveat interest;
- A notice caveat, gives notice to the rest of the world of someone’s rights in relation to the property;
- An improper dealings caveat; and
- A registered proprietor’s caveat.
What is a caveatable interest?
There are many different types of caveatable interests, but the common thread in all of them is that in order for a caveatable interest to exist, the party seeking to lodge it must have a current legal or equitable interest in the specific piece of land that the caveat is sought to be registered against. Some common examples of caveatable interests are:
- A lessee under a lease;
- A holder of an unregistered mortgage;
- A purchaser under a contract of sale for the land;
- A chargee pursuant to a contract, for example terms and conditions of sale; or
- A financial contributor to the property.
This is by no means an exhaustive list. It is important when lodging a caveat that appropriate supporting documentation and/or a statutory declaration is lodged with the caveat documentation at Landgate. An error in description of the caveatable interest or failure to lodge appropriate documentation may render the caveat ineffective at a later date. It is therefore important to get appropriate advice and guidance to ensure the caveat is lodged correctly.
What is not a caveatable interest?
As before alluded to, generally a debt owed to you is not a caveatable interest. There are, however, some circumstances in which a debt for a business transaction where money is owed to you can bring about a right to lodge a caveat. In this regard, it is important that in your terms and conditions you have appropriate charging clauses. If you have terms and conditions that allow you to charge the property of the party that you’ve provided the goods or services with as security and/or a guarantor that has guaranteed the payment of your goods and services, then you will have a right to lodge a caveat against either the party you’ve supplied or the guarantor’s land.
The more common types of matters where you cannot lodge a caveat is if you are owed money and don’t have appropriate provisions in your terms and conditions, you have conducted work on the property as a builder or tradesman but do not have appropriate provisions in your terms and conditions allowing you to secure against the land, if your partner from a de facto or matrimonial property is the sole owner of the property and you have not made any financial contributions to the property, you do not have a caveatable interest in it.
What happens if I lodge an invalid caveat?
Landgate may accept the lodgement of a caveat even if there is not a proper caveatable interest in the property. If you do lodge a caveat and there is not a caveatable interest in the property and the landowner is adversely affected by the lodgement of the caveat, the owner of the land has a right to seek compensation, which could be substantial if there is significant delays in the settlement of the sale of the property or a sale falls through because an invalid caveat was lodged against the title.
Ensure when you are contracting with someone that you have appropriate provisions in your terms and conditions, that if they do not pay their bill on time that you do have a right to register a caveat against their land. Ensure that the parties that own the land are either the party you’ve contracted with or have guaranteed the obligations of the party that you’ve contracted with. Ensure the documentation is prepared professionally and properly when lodged
If you require assistance with removing an invalid caveat, lodging a caveat or having contracts prepared which give you a caveatable interest, please contact Lynn & Brown Lawyers on 08 9375 3411.
About the author:
This article has been authored by Steven Brown who is a Perth lawyer and director at Lynn & Brown Lawyers. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.