Selling a NSW Property With a Caveat — Why Sellers Must Act Before Listing

When a seller discovers a caveat only after a buyer is found, the transaction often becomes stressful and time‑critical. A caveat on title means someone other than the registered owner claims an interest in the property, and that claim can block registration of a transfer or new mortgage until it is dealt with. Buyers’ lenders will usually not advance funds if a caveat remains, because it compromises their security position.

The best time to deal with a caveat is before the property goes to market. Start by ordering a current title search and copies of any caveats. Identify:

• The caveator (who lodged it).

• The interest they say they have (for example, unregistered mortgage, resulting trust, purchaser’s interest).

• Any underlying agreement, court order or family arrangement that gave rise to it.

If the caveat reflects a legitimate loan or agreed interest, you may be comfortable honouring it and structuring settlement accordingly. For instance, a parent who helped fund the purchase may be repaid from the sale proceeds pursuant to a written loan agreement, with a withdrawal of caveat signed at settlement. If, however, the caveat reflects a disputed family claim – such as an ex‑partner asserting an interest not supported by contributions – you may need to pursue removal via lapsing procedures or court before marketing the property.

Delaying this work is where sellers encounter real risk. Imagine signing a contract with a 42‑day settlement, then approaching the caveator to sign a withdrawal. If they see a sale price and believe they deserve more, they may refuse or use the timing to leverage a better deal. Buyers then face uncertainty, their finance approvals may expire, and you can be exposed to default, compensation claims or forced renegotiations.

From a disclosure perspective, NSW sellers must be transparent in their contract about anything on title, including caveats. Agents should be briefed so they do not inadvertently under‑disclose to buyers. Early, honest disclosure builds credibility and avoids late‑stage surprises that can derail trust and settlement.

Take the time, before listing, to understand any caveat, obtain advice on whether it is valid, and choose a strategy – negotiate, repay, or challenge. Doing this early allows you to set realistic settlement periods, reassure buyers and keep your sale focused on price and terms, not title issues.

This article is general information only and is not legal advice. You should obtain advice tailored to your specific circumstances before making any decisions about buying property with family.