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The Caveat - protecting your interest in land

02 February 2015

You have signed up to purchase a property and paid a large deposit, but you aren’t going to complete the purchase for another year. What if the vendor sells to someone else during that time? What if the vendor cancels your agreement and won’t or can’t pay your deposit back? How can you protect your deposit in these situations? You can register a “caveat” against the title to the property. A caveat will protect your right to purchase the property by preventing the owner selling, mortgaging or dealing with the property while the caveat is in place.

 

Notices of claim

You have separated from your husband and left the family farm. The farm is owned by your husband alone. How can you prevent your husband from selling or mortgaging the farm without your knowledge? You can protect your interest in a property under the Property (Relationships) Act 1976, by registering a notice of claim under that Act. The notice of claim works in the same way as a caveat.

 

What is caveat and how does it work?

“Caveat” is a Latin word which means “let him or her beware.” Once a caveat has been registered against the title, anyone searching the title can see that someone else claims an interest in the land. No dealings can be registered against the title unless the caveator consents to their registration.

If the owner attempts to register any dealing (for example, transfer the land to someone else or mortgage the land), then the caveator is served with notice. The caveator must then apply to the High Court within the required time for an order that the caveat not lapse. If the caveator does not do this, the caveat will lapse and the owner will be free to deal with the land as the owner pleases. If the court orders that the caveat not lapse, then it will remain on the title until the caveator’s claim has been dealt with by the court or withdrawn by the caveator.

 

When can a caveat be registered?

You must have sufficient interest in the land that legally supports the registration of a caveat. As well as the interest of a purchaser, caveats can also be used to protect other unregistered interests – such as those of tenants, mortgagees, holders of rights of way or other easements and, in some circumstances, beneficiaries of trusts. Being owed money by someone who owns land does not, on its own, give you the right to lodge a caveat. You can only register a caveat if you have a written agreement with the owner which gives you an interest in the land which will legally support a caveat.

A purchaser of land does not usually register caveat unless there are circumstances that make this desirable. The long term agreement example given above is one. A caveat may also be desirable where the vendor tries to cancel an agreement, or the purchaser is worried that someone else might register an interest against the title that will prejudice the purchaser’s interest.

If you register a caveat without having reasonable cause, you could be liable to pay compensation to anyone who has suffered damage as a result.

You should take advice from your lawyer if you believe that a caveat might be the appropriate course of action to protect your interest in some land.

 

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.