What Is a Real Estate Caveat and How Does It Affect You?

Buying or selling a home is often the largest single transaction of your life. From the minute you make a decision to buy or sell a home or investment property you have to make decisions that have legal ramifications. You want to make sure you have experienced legal counsel representing you.

If you are not a seasoned real estate investor, you are going to run into lots of terms and concepts that you might not be familiar with.  It behoves you to understand any legal terms or concepts you come across in the process of buying or selling.

One such concept is that of a property caveat.

Caveat

A caveat, in property, is an expression of interest in a property that stops any deal from occurring. It is a known red flag for prospective buyers. A caveat warns potential buyers that another buyer is interested in the property. A caveat is a notice of a claim which may or may not be valid. The validity of the claim has to be determined.

Absolute Caveat

These caveats do not allow any dealings in the property, so unless they are removed there can be no business dealings or property acquisition.

Permissive Caveat

These types of caveats allow dealings on the property.

Why Get a Caveat

The most common reason to pursue a caveat on a property is when contracts have been exchanged on the property but the property has not yet been settled. The purchaser acquires a “caveatable interest” in that he files the caveat to protect his interest in purchasing the property.

Caveats on the title provide long-term protection as they remain on the title until they lapse, are removed by a court order, are formally withdrawn, or when the caveat is satisfied by the registration of a plan.  If you encounter a property with a caveat make sure you get a reputable real estate attorney to help you navigate the process.

Caveats provide an additional layer of fraud prevention by preventing claims on the title by other parties for unencumbered land.

It increases protection for people buying property with long settlement periods by recording their interest in the property or title before it is transferred to them.

Who Can Lodge a Caveat?

Anyone who has signed a contract to purchase a house can file a caveat. In rare circumstances when two real estate agents sell the same property to different buyers. In this instance, the person who lodges the caveat first may have a better claim to the property.

A bank lender can file a caveat on a purchaser’s behalf to prevent the vendor from selling the property for a higher price.

The Supreme Court can make a ruling to extend or remove a caveat as it deems appropriate. After a judgement is made regarding a caveat, the court will then take action to extend, withdraw or remove the caveat in accordance with the court’s decision.

If you lodge a caveat without reasonable cause, you are liable to pay compensation to any person who suffers a financial loss as a result. This is why it’s best to speak to an experienced property lawyer about lodging or removing a caveat.