It is unfortunate that not all property settlements are done amicably and more often than not, parties go through a property dispute in court. Some parties in a property dispute find it necessary to lodge a caveat on the certificate of title of real property.
A caveat is a legal notice that is registered on a certificate of title that operates as a warning that there is an equitable interest on the real property and prevents transactions on it like buying, selling or registering a mortgage.
A spouse or de facto partner who feels uncertain about the security of his share in the relationship’s properties sometimes resorts to lodging a caveat on the certificate of title. A property settlement dispute before the court requires many steps. In fact, a property settlement goes through a four-step process. Roughly, the four-step process followed by the courts in a property settlement involves first ascertaining the net asset pool of the parties, and then they will identify the individual contributions of the parties to the net asset pool.
The third step in a property settlement is assessing the future needs of the parties, and finally, the court will make an order that is just and equitable to all parties. With these steps, it is only expected that a property settlement will take some time which is why some parties register their interests on real properties that are the subject of a property dispute. For example, a wife would lodge a caveat on a parcel of land registered under the husband’s name to ensure that it could not be sold or transferred pending the existence of the caveat.
To lodge a caveat, the caveator must show that he has a direct and equitable interest in the real property. The caveat will provide protection to the caveator’s interest on the land but will not bestow proprietary interest. Once a caveat is lodged, it will act as an injunction effectively preventing the Registrar of Titles from registering any instrument or dealing like the sale, lease or mortgage on the certificate of title.
The danger with lodging a caveat is that the caveator might end up paying compensatory damages. This is because it might be proved later on that the caveat is unmeritorious and the other party suffered financial loss because of the caveat. There are two main ways by which a registered owner can remove the caveat: removal by application to the Registrar General and removal by order of the Supreme Court. Thus, if the registered owner contests the caveat, the caveator must be prepared to incur legal expenses to defend his interest in the property.
The removal of the caveat that is found to be lodged without merit may also result in compensation of legal costs incurred by the registered owner. Furthermore, if a party fails to prove his interest in the property he has forever precluded from lodging a caveat on the same property.
The party who is considering for lodging a caveat must first seek legal advice. The need to protect one’s interest on a property must be balanced with the danger of being ordered to pay damages as a consequence of filing an unmeritorious caveat.
A lawyer will know whether the party has a direct and equitable interest in the property, thus, can file a meritorious caveat. On the other hand, the recipient of a notice from the Registrar of Title must also seek legal advice on the removal of the caveat and claim for damages.