Q&A: Using Caveats Over Real Property in Debt Collection

Common questions and answers for using caveats over real property in debt collection…

When it comes to securing debts and interests related to real property, a caveat can be a powerful legal tool. At RCR Lawyers, we specialize in guiding you through the intricacies of property law, debt collection, and legal proceedings. In this article, we’ll dive into the world of property caveats, answering common questions and providing valuable insights for our clients across Australia.

What is a Caveat?

A caveat is a formal notice that can be lodged on real property, effectively preventing any person, including the registered proprietor, from conducting dealings with that property. It serves as a legal safeguard to secure interests or claims on a particular property.

Who Can Lodge a Caveat?

Any person with a legitimate estate or interest in land can lodge one. However, it’s essential to understand that obtaining a judgment alone doesn’t grant you the right to lodge a caveat.

Establishing an Interest

To lodge a caveat, you must have a real interest in the property itself, establishing a direct relationship between the debt and the property. While this is not an exhaustive list, common examples of caveatable interests include being an equitable mortgagee or chargee, a purchaser under a purchase contract, a lessee, a beneficiary under a trust, or a victim of fraud.

Understanding Equitable Chargees

When a debtor agrees to charge their real and personal property to secure a debt, the creditor becomes an “equitable chargee.” The term “equitable” in this context means “unregistered.” For example, a guarantor may charge their land as a beneficial owner and trustee of every trust in favor of a creditor to secure the payment of a debt and the performance of certain covenants. It’s crucial to review credit applications and guarantee documents to ascertain equitable chargee status. When in doubt, seek legal advice from professionals who can clarify your status.

The Lodging Caveat Procedure

The process for lodging a caveat involves several steps, such as confirming the existence of the debt and the caveatable interest, lodging the caveat (usually done by a solicitor), and notifying other parties with an interest in the property. It’s vital to commence legal proceedings in the Supreme Court within three months of the caveat’s registration. Failure to do so will result in the caveat lapsing. Remember that you can only lodge a caveat once.

Caveat vs. Writ: Why Use a Caveat?

One advantage of a caveat is that it can be lodged as soon as the debt becomes owing, while a writ requires a judgment. However, it’s crucial to understand that a caveat, particularly one based on a charging clause, doesn’t take priority over registered mortgages and potentially future liquidators. To establish priority, a specific charge should be carefully drafted.

Consent Caveats

Consent caveats are a unique type of caveat that arises when a registered proprietor agrees to the caveat, even in the absence of a pre-existing caveatable interest. Consent caveats remain on the property title even after the typical 3-month expiry period.

The Impact of Consent Caveats

A consent caveat prohibits the debtor from transferring or refinancing the property without addressing the underlying debt or securing the creditor’s consent. This can serve as a valuable tool in securing debts and protecting creditor interests.

At RCR Lawyers, we are well-versed in property caveats, debt collection strategies, and the complex world of property law. If you have questions or need assistance with caveats over real property in the context of debt collection, our legal experts are here to help.

Contact RCR today online, by email at [email protected], or by calling us at (07) 3009 8444.

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