Don’t Lodge a Caveat in NSW Unless You Understand “Reasonable Cause”
In New South Wales, a caveat is a powerful tool. It tells the world that you claim an interest in a property and can prevent registration of new dealings until your claim is addressed. Precisely because it is so powerful, the law restricts when you can use it. You must have a genuine legal or equitable interest in the land, and you must have “reasonable cause” for lodging the caveat. Lodging one simply to gain leverage or express displeasure can backfire.
Where people go wrong is confusing a general sense of being “owed something” with having a recognisable property interest. Feeling that you should receive money when a property is sold is not the same as having a defined charge, mortgage, trust interest or purchaser’s interest. For example, being married to the registered owner does not automatically give you a caveatable interest in their sole‑owned property. Your rights in a family law settlement are different from a specific proprietary interest in land.
Another mistake is treating a caveat as a way to stop someone making decisions you disagree with, without connecting that disagreement to a legal interest in the land itself. A parent might lodge a caveat to stop their adult child selling a house they once lived in, or a sibling might caveat a family home because of a broader inheritance dispute. Unless there is a clear legal or equitable interest tied to the property – such as a documented loan or trust arrangement – the caveat may not be justified.
The law allows the registered owner to challenge a caveat. If they believe it was lodged without reasonable cause, they can take steps to have it lapse or apply to court for its removal. In that process, the person who lodged the caveat must explain exactly what interest they claim and what facts support it. If the court finds there was no proper basis, it can order the caveat removed and may award damages for any loss the improper caveat caused – for example, a failed sale or increased interest costs.
Misunderstanding what counts as evidence is another trap. Vague recollections of conversations or unlabelled bank transfers may not be enough. Someone who contributed money might see that as proof of a loan or co‑ownership; the owner might say it was a gift. Without clear records of an agreement that creates an interest in land – such as a loan repayable from sale proceeds, or a trust arrangement – the claim can be difficult to sustain. Lodging a caveat first and hoping to “sort it out later” places the cart before the horse.
None of this means you should never use a caveat. When there is a genuine, evidenced interest in land, a caveat can be an essential safeguard. A private lender with a written charge clause, a purchaser under a contract worried about the vendor dealing with the property, or a person with a clear equitable interest arising from contributions may be well‑advised to protect that interest. The key is that the caveat reflects an existing right, not a speculative or emotional claim.
Before lodging, it is worth asking some hard questions: What exactly is my interest in this land? Can I describe it in legal terms? Do I have documents or clear evidence to support it? Does my issue relate to the property itself, or is it part of a broader dispute that should be dealt with in another way? If the honest answer is “I don’t know” or “probably not”, pausing for advice is usually safer than pressing ahead and hoping the caveat will hold.
Declaration: This article is intended as general information only and is not legal advice. Because every property matter is different, you should obtain advice specific to your circumstances before making any decisions. To discuss your situation, contact JKA & Co Conveyancing for tailored advice