Caveats + Mortgagee Sale, How solid is the contract of sale.

A mortgage wll take priority. Other debts won't generally, but if someone else has an equityable interest in the property and this interest is notified by caveat then they would likely have priority over your interest – which is just as a purchaser.

So the person who lodged the caveat could get a judment and then an order to sell the property and this may override your interest even if you had echanged contracts.

Just make sure you have the deposit low and have it in a trust account and don't release it to the vendor in any circumstances – check with you vic solicitor as there is something in the conveyancing or real property act down there about the release of deposits. I cannot remember the details now.

You would also need a special condition that if it doesn't settle by a certain date then you get to rescind the contract and your deposit back.

Also get cpies of the caveats to see what they are. If they are all valid and relate to monies owed etc then at the end of hte day teh vendor may be bankrupted.

A caveat is notice to everyone that someone else has an interest in the property. It may or may not prevent the dealing with that property – such as mortgaging it or changing names. However someone with a caveat could have their interest take priority over your interest.

eg. in NSW there is a case Black v Garnot. I forgot who is who, but the seller of the property had money problems. The purchaser paid the 10% deposit and on the day of settlement the solicitor checked the title – looking for any last minute caveats. After checking they went to settlement – about 2 hrs later. It was during this time that someone who had a debt owed and had a judgment actually lodged a caveat on the title. They had a writ to take possession of the property and the question was who had the greater priority – the person with the writ or the person who had paid the deposit but hadn't settled yet.

It turned out that both had interests in the property and both could have protected these itnerests by lodging a caveat. The one who lodged first was deemed to have prority over the one who didn't.

Therefore in NSW now it is recommended that lawyers advise clients purchasing proerties that they should lodge a caveat after exchange of contracts.

a caveat is not a form of security. just a notice that someone has some equitable interest in the property. So you could allow a trustee to lodge a caveat, but if there is no interest this would be ineffective. You could have some sort of agreement with the trustee whereby the land is charged to the trust. This could be like giving an unregistered mortgage with the caveat notification of the mortgagee’s interest in the land.

If you are thinking asset protection there are many other things to consider especially the bankruptcy act.

It is nothing like transferring title.

@zen007 – if the trust isn’t in existence when you enter into the contract you may have to pay double stamp duty. @terryw

@scott no mates – yes the stamp duty seems to apply when its transfered to another person/entity, however what Terry mentioned in the lights of the title of our property where the trustee (me) lodge a caveat on the title of the property that is in my name, in agreeance, mortaging the equity to my trust which will incur no stamp duty!

kerri wrote:

Hi we just bought a house in Victoria it was a morgagee auction and the liquidator was present it has Caveats on the property we were meant to settle last week but settlement was delayed we have no idea for how long we really won’t this house what happens now thanks

You won’t be able to settle (if mortgaging) until the caveats are removed.

What does your solicitor say?