4 January 2017
JHK Legal is often asked the question “I have a credit agreement in place with a client and they have not paid their invoices – can I lodge a caveat against their property or the guarantor’s property?”
This article is a guide of what you may be able to do in the above situation in Queensland. It is not a substitute for legal advice. If you have any questions or concerns we suggest that you contact JHK Legal for further information.
What is a caveat?
A caveat is a notice you can register against land/land and building that prevents the registration of further interests that may affect your interest recorded in the caveat, unless your consent is obtained (with some exceptions).
Who can lodge a caveat?
The fact that someone owes you money does not give you an automatic right to lodge a caveat – you must have a “caveatable interest”.
You should consider the credit agreement under which the goods were sold or services provided (and/or any guarantee) to determine if it includes a clause that charges all of the client’s (and/or the guarantor’s) legal and equitable interest (present and future) of whatsoever nature held in any and all real property, as security for obligations under the credit agreement.
For example in BBC Hardware Limited v G.T. Homes Pty Ltd  2 QD R 123 Thomas J stated:
“The charges in question arise under the fairly familiar terms of a supplier’s agreement. Such charges were obtained both from the defendant company and the defendant directors. Each defendant, in the relevant document, committed itself himself or herself to the following:
“The applicant hereby charges with the due payment of those money all of the applicant’s interest in real property, both present and future, and the applicant consents to the company lodging a caveat noting its interests hereunder.”
Such a charge has been recognised in many cases as creating a recognisable equitable interest. It as described in Clark v Raymor Brisbane Pty Ltd [No. 2]  Qd. R 790, 795 as an equitable general charge securing a contingent debt under a guarantee and capable of attaching a property in land. No defence or facts have been presented or offered by the defendants challenging the validity of the charge.”
Is there a system to govern the lodgement of caveats?
In Queensland the Land Title Act 1994 (QLD) governs the system for the lodgement of caveats.
JHK Legal can assist you with the lodgement of the appropriate forms at the Department of Natural Resources and Mines. There is a fee payable, dependent upon the number of interested parties already noted on the title of the real property.
What happens after a caveat is lodged
After a caveat is lodged and registered, any other interested parties will be notified of your caveat by the Registrar.
Unless the registered owner’s consent is lodged at the time the caveat is lodged, you will have three months to issue proceedings in a court of competent jurisdiction (generally District Court or Supreme Court) to establish the interest claimed in the caveat, and notify the Registrar of the same, failing which, the caveat will lapse. This does however provide you some time to negotiate with the debtor, if that option is available.
The debtor may also serve you with a notice requiring that the proceedings be commenced within 14 days of service of the notice.
The above time frames, and the correct lodgement of the caveat is important as there are only limited circumstances in which a caveat may be lodged more than once, and very rarely do our clients meet that criteria.
What happens if the debtor still does not pay me after the caveat is lodged and proceedings have been commenced?
Depending on how the proceedings are framed – if you are successful and obtain a judgment, you may be awarded orders for sale of the property, and/or a declaration of your interest in the property. Further steps will then need to be taken if you wish to sell the property.
Please note that if the property is sold all other interested parties will need to be considered when it comes to distributing the sale proceeds – for example other caveators and mortgagees.
If the debtor pays me in full or we come to a settlement arrangement and an agreed, reduced amount is paid do I have to remove the caveat?
Short answer – yes. JHK Legal can assist you with this process. Depending on the terms of settlement, generally we would suggest to provide a signed Form 14 – General Request (Withdrawal of Caveat) to the debtor (or their solicitor) for their lodgement once the settlement funds are received in cleared funds.
Something to keep in mind
A charging clause, and as a result a caveat, does not give you priority over prior registered mortgages.
If you are owed money and you wish to consider lodging a caveat and enforcing your rights, JHK Legal are happy to assist you through the process.
Associate Director – Brisbane