Buying in NSW When There Is a Caveat on Title — What Buyers Must Clarify Early

Discovering a caveat on title partway through a purchase can be unsettling if you have never encountered one before. A caveat is a formal notice lodged with NSW Land Registry Services that someone claims a legal or equitable interest in the property. Once registered, it acts like a warning flag and can prevent the registration of a transfer or new mortgage until the caveat is withdrawn, lapses or is removed by order. For a buyer, this goes to the heart of settlement certainty.

The first question is: who lodged the caveat and why? Common scenarios include:

• A private lender securing a loan given to the owner.

• A parent or relative who contributed funds and wants to ensure repayment from sale proceeds.

• A spouse or de facto partner in a family law dispute claiming an equitable interest in the home.

Your lawyer or conveyancer should obtain a copy of the caveat to see the “particulars of the estate or interest claimed” and the facts said to support it. For example, a caveat may refer to an unregistered mortgage, a written loan agreement or a constructive trust arising from contributions. The strength and nature of that claim affect how easily it can be resolved.

Next, you must understand how and when the caveat will be removed. A seller simply promising “we’ll fix it before settlement” is not enough. In NSW, the usual pathways to remove a caveat include:

• Voluntary withdrawal by the caveator.

• Lapsing following notice procedures if the caveator does not commence proceedings to support it.

• Court orders removing the caveat if there is no caveatable interest.

Attempts to resolve the caveat the week before settlement often fail because court processes and negotiations take time. Instead, buyers should insist that the contract clearly allocates responsibility and timing. For example, special conditions might require the seller to:

• Provide a signed withdrawal of caveat by a stated date; or

• Direct part of the purchase price at settlement to pay the caveator, in return for a withdrawal produced at settlement.

Consider this example. A couple is selling their unit. The wife’s parents lodged a caveat when they advanced $150,000 for the purchase, backed by a written loan agreement. Your contract could state that $150,000 from the net proceeds is to be paid directly to the parents at settlement, with a signed withdrawal of caveat handed over simultaneously. If the parents are in dispute with the couple about how much is owed, and no mechanism is documented, you risk settlement delays while they argue between themselves.

A caveat does not automatically mean a purchase is unsafe, but it always means additional risk that must be managed. The key is early investigation, contractual safeguards and realistic settlement timing. Go in with open eyes: the caveat reflects another person’s rights that must be resolved before you can safely call the property your own.

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.