Caveats

Protecting your interest in land

The Latin word 'caveat' literally translates to 'let him beware'. In a legal sense, caveats are generally used to protect the proprietary rights of the person registering the caveat by stopping the registered owner of the property from transferring, mortgaging or otherwise dealing with the property.

Why use a caveat?

There are a number of scenarios in which you may want to register a caveat. Some examples are:

• When there's a significant time lag between a purchaser signing an agreement and settlement, or where (after the agreement is signed) the vendor may try to cancel the agreement. A caveat should prevent the vendor from dealing with the property in any way that will interfere with your interest.

• A beneficiary of a trust may need to register a caveat to prevent the land to which their beneficial interest relates being transferred. Again, a caveat registered in this instance will protect the beneficial interest being claimed on the land.

• There is also a provision under section 42 of the Property (Relationships) Act 1976 available if you wish to prevent land that is the subject of a relationship property claim being dealt with by your ex-partner in a way that defeats your interest or estate in the land. Registering a caveat in this instance is a good way to protect your interest until any relationship property dispute involving the land has been resolved.

As you are likely to already be dealing with us (or another lawyer) in any of the above-type matters, we will work with you on the registration of a caveat.

When to register a caveat?

The Land Transfer Act 2017 sets the framework for the registration of caveats. One of the most important things to consider before deciding to register a caveat is whether the interest that you want to protect meets the criteria in section 138(1). A 'caveatable interest' should only be registered where it meets the relevant criteria.

If you register a caveat against the land without a caveatable interest, you are liable for any loss or damage suffered by the registered owner of the land as a result of the caveat. Therefore, it is important to get clear legal advice regarding the interest you want to protect, because a mistake as to whether your interest is sufficient to support a caveat could result in a costly damages claim.

Registering a caveat

Having determined that your interest or estate is a caveatable interest, we will help you ensure that the formative requirements of the caveat are met, and will prepare an authority and instruction form to register the caveat.

How do I remove a caveat from my land?

A caveat is generally removed in one of three ways. It is withdrawn by the person registering it, it lapses or it is removed by an order from the court.

Often a caveat is withdrawn – usually at the registered owner's request – on the basis that they have or will fulfil any outstanding obligation to the person who has registered the caveat.

A caveat may lapse if it is not followed by the requisite order being made by the Registrar-General of Land pursuant to section 143 of the Act. The timeframes prescribed are either 10 or 20 working days unless the court makes an order that the caveat has lapsed at an earlier date.

Finally, the person whose estate or interest in the land is affected by a caveat may apply to the court for an order that the caveat is removed.

Caveats are very useful and effective in protecting your interests in land during disputes. However, it is important to talk with us early on to avoid the risk of incurring significant liability if they are registered incorrectly.

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors' knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513.