Caveats

I understand what caveats are and the purpose of why they would be used, in the case of the caveator having an interest (usually financial) in a property. If a caveat has been lodged on a particular property, it's my understanding that the property cannot then be sold unless the matter has been resolved satisfactorily with the lodger (usually debts are paid or agreed to be paid out of settlement funds) and the caveat subsequently removed from the title.


However, what is the difference between equitable interest and legal interest?

 

Jacque you're correct as to caveats blocking dealings with the land. The caveat may note certain dealings which are permitted or it may just be a blanket ban on all dealings.

In the real estate context, the difference between legal and equitable interests is essentially this:

1) the legal owner is the person with their name on the title (i.e. who is shown on the certificate of title and in the register of titles as the registered proprietor)

2) the party which may typically have an equitable interest in the property is the purchaser under a contract for sale. They are said to have an equitable interest in the land which is sufficient to support a caveat, i.e. it is a caveatable interest.

The details differ between states, but generally unless a caveat is lodged with the consent of the registered proprietor, there is a limited window within which to commence court proceedings or the caveat lapses...

As always, see your solicitor first.

N.

 

Thanks Nige, but in this case the caveat lodger has an equitable interest because he has debts owing to him from the title holder of the property.

Is this the norm?

 

On its own a mere debt would typically not support a caveat if lodgement of the caveat was challenged. As a mere unsecured creditor the creditor has no proprietary interest in the assets of the debtor.

But what sometimes happens is that a caveat is lodged with consent as a form of security. Alternatively it may be lodged to support an equitable (I.e. An unregistered) mortgage. But in that case the "caveatable interest" being asserted is not the debt but the proprietary interest in the property under the mortgage, albeit unregistered.

Sorry can't be more specific on the limited details. But in short - no it's not typical and should be removed before any purchaser completes.

Cheers
N

 

Sorry for the late reply - 5 years! I was just looking for another post and found this one.

A legal interest is one which is recorded on title. eg 2 people buy a property as tenants in common. Both are legal owners and both have legal interests.

An equitable interest is one which is no recorded on title. eg husband and wife, with the property in the husband's name only. The wife has make financial and non financial contributions to the property so she would have an equitable interest and could lodge a caveat.

another eg is that of trustee and beneficiary. A is the trustee for B and the legal owner of B's property. B has an equitable interest while A has a legal interest. B could lodge a caveat to prevent A from selling his property or mortgaging it etc.