When purchasing property, one of the first things a prudent purchaser should examine is the title. A caveat appearing on that title is a red flag. It signals that another party is claiming an interest in the property and wants to be notified before any dealings occur. For a purchaser, this is not the end of the road, but it does require careful handling to ensure the transaction proceeds smoothly and the property is transferred free from competing claims.
What does a caveat mean for a purchaser?
A caveat is essentially a warning. It does not prove the validity of the interest claimed, but it prevents the property from being sold or transferred without the caveator’s consent or withdrawal. For a purchaser, this creates an immediate hurdle: settlement cannot occur while a caveat remains on title.
The nature of the caveat is important. Some arise from genuine interests such as a lender securing an unpaid debt, a purchaser under a previous contract, or a party with an equitable claim. Others may be less well-founded, lodged simply as a protective step in a dispute. Either way, a purchaser must factor the caveat into their decision-making.
Pathways to resolution
The key question is how the vendor intends to deal with the caveat. A purchaser should expect clarity on this early in the transaction. There are three common scenarios:
Withdrawal before settlement: The vendor may arrange for the caveator to withdraw the caveat once the underlying issue is resolved, whether by repayment of a loan, settlement of a dispute, or satisfaction of a contractual obligation. The withdrawal is lodged at the Land Registry, clearing the title.
Consent for the transfer: In some cases, the caveator may agree to allow the transfer to proceed on the condition that their interest is protected in another way, such as by repayment from settlement funds. This usually requires coordination between lawyers and the caveator.
Court removal: If a caveator refuses to withdraw and the claim is not valid, the vendor may seek an order from the Supreme Court for removal. While effective, this route is time-consuming and expensive, which can delay or derail a sale.
For a purchaser, understanding which of these approaches is in play is crucial. The safest position is to insist on settlement only once the caveat has been withdrawn or consent obtained, ensuring the property is transferred with a clean title.
Practical considerations for a purchaser
The presence of a caveat is not necessarily a reason to walk away. In many cases, it is a routine matter that can be resolved before settlement. What matters is timing, transparency, and ensuring the right protections are in place.
A purchaser should ensure that the contract of sale includes conditions requiring the vendor to remove the caveat before settlement or otherwise satisfy the purchaser’s representative that a clear title will be delivered. Deposit payments should be handled carefully, and settlement dates may need to remain flexible depending on the nature of the dispute behind the caveat.
Ultimately, the focus for a purchaser is certainty. The risk of proceeding without a clear plan for the removal of the caveat is too high, as it could leave the purchaser without a good title or tied up in litigation. With the right advice, most caveats can be managed and resolved in a way that still allows the transaction to progress.
Disclaimer
The information on our website is general and is not legal advice. We put lots of work into making our content insightful, but it may not apply to your personal circumstances. We’re more than happy to help with your individual issues – just reach out.