Property law: Caveats and competing priorities

Date: Nov 02, 2011
Document Type: Newsletter

One of the enduring dreams for Australians is property ownership, and therefore, it is of little surprise that property interests in land are so fiercely guarded. The array of proprietary interests can be mindboggling, and can include tenancy, sub-tenancy, mortgages or fee simple, just to name a few of the different proprietary interests that exist. Due to the myriad property interests in land which are available – and coupled with how jealously people guard their interests – it is perhaps of little surprise that disputes in relation to competing interests in land will arise. It is not uncommon for numerous valid interests in land to be held simultaneously by different parties, therefore, how are disputes resolved in such circumstances? If there are a number of valid interests in land: Who would the law consider as having the better interest? Even though all registrable property interests fall under the umbrella of the Torrens system, situations where there are competing interests in land still may come up in certain circumstances.

What are the relevant principles in deciding who has the better priority in the land?

There are a number of factors which need to be taken into account when ascertaining the priorities in regards to the item. First, in establishing the relevant principle, it must be worked out whether the land is old system title, therefore the general law will be applied, or the land is a Torrens title.

Secondly, in order to resolve a dispute to the satisfaction of the law, as well as the parties, the interests will be classified as either legal or equitable, and once all the principles are established and confirmed, then the applicable rule will be applied.

However, because most land is registered under the Torrens system, this article will be primarily concerned with priorities under that system.

Caveats

When a person lodges an injunction with the Registrar claiming an interest in land, that person may lodge a caveat which prevents any future registering of interests without their consent. Once the caveat is registered, it will then be reflected in the Register, but not on the certificate of title.

By lodging an injunction with the Registrar, a person’s interest in the land cannot be dealt with, without their permission. Although, keep in mind that different rules apply in each State, so always check with a lawyer to make sure your caveat is valid.

Lodging a valid caveat

Under the Torrens system, when a person decides to lodge a caveat, they must fulfil all of the requirements before it has an effect. Generally speaking, a caveat must state the following details:

• the nature of the caveat
• the quantum
• description of the land
• the factual basis of the caveat.

What are some of the disputes that may arise in relation to interests and priorities?

Registered and subsequent registered interests: the general approach if there is a dispute between a registered interest and subsequent registered interest, is that the priority will usually be determined by the date in which the interest was registered.

Registered interest and subsequent unregistered interest: the nature of the Torrens system is as such, that any interest lodged in the Register, will not be indefeasible. So therefore, it is a good approach for anyone that has an interest in land, to always register their interest as quickly as possible.

Unregistered interest and subsequent registered interest: the party with the unregistered interest, may have had an interest in the land before the subsequent registered interest, however, in most instances, the registered interest will have priority, unless there is evidence of fraud, in personam or an overriding interest.

All interests are unregistered: the party who had the interest in the land first, will prevail if there is a dispute – but this approach is not always applied. When a dispute arises between two equitable interests, there are a number of considerations that will be taken into account, which is dependent on the circumstances surrounding the dispute.

Conclusion

It is sound practice for everyone who has an interest in land, to lodge their interest with the Registrar in order to protect their property rights. However, registering an interest in land, still does not prevent disputes from occurring, and if you happen you to find yourself experiencing any issues with another party, please seek the required assistance from a lawyer immediately to prevent your property interests from being lost.

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