Legal
Caveats revisited
– how can they assist a creditor in recovering debts? By Georgina Wu MICM*
What is a caveat? A caveat is a warning recorded on the title of land giving notice of one’s unregistered interest in the land. It also acts as a statutory injunction preventing the registration of plans and dealings against the title of the land.
Caveatable interest One must have a caveatable interest, that is, a legal or equitable interest in the land in order to register a caveat. Caveatable interest may be created contractually. It is quite common for commercial credit applications and personal guarantees to include a charging clause entitling the supplier/ creditor to register a caveat against any real property owned by the debtor/guarantor to secure payment of the trade debt. An example of a basic charging clause is: X charges all of X’s interests in all land owned by X including any land X obtains an interest in after the date of this agreement to secure the payment of all moneys owing by X to Y. By virtue of the charging clause, the supplier becomes a secured creditor.
Tasmania, Northern Territory and the Australian Capital Territory, caveats are still registered on paper.
Lapsing caveats Each state and territory has separate rules and legislation governing caveats. In Queensland and Northern Territory, caveats are divided into two categories: non-lapsing caveats and lapsing caveats. Examples of nonlapsing caveats are caveats registered by the owner of the land and caveats registered with the consent of the owner of the land. Non-lapsing caveats do not automatically lapse. Lapsing caveats are caveats that are not non-lapsing caveats. Most caveats registered by a supplier pursuant to a charging clause under a commercial credit application or personal guarantee would be a lapsing caveat. Lapsing caveats will automatically lapse after three months from the date of lodgement unless notification is provided to the relevant Registrar General that court proceedings claiming an interest in the land has been commenced. Caveats registered in New South Wales, Victoria, South Australia, Western Australia, the Australian Capital Territory and Tasmania do not automatically lapse.
How are caveats registered?
Georgina Wu MICM
Caveats are registered electronically through an electronic lodgement network known as PEXA in New South Wales, Victoria, Queensland, South Australia and Western Australia. In
58 CREDIT MANAGEMENT IN AUSTRALIA • July 2021
Caveator’s ability to sell Subject to its construction, a typical charging clause contained in a credit application or personal guarantee would give rise to an equitable charge.
