All purchasers of real property should lodge a caveat on the title to the property as soon as they enter into a contract to purchase the property.
A caveat is a notation listed on the title of the property signifying your interest in the property and preventing any third parties from registering dealings on the title (save for some exceptions) such as other prospective purchasers of the property or creditors of the vendor.
The High Court of Australia case of Black v Garnock in 2007 highlights the importance of purchasers lodging caveats on the title after entering into a contract to buy the property. A brief summary of the facts and decision in Black v Garnock follows:
- The purchasers (the Garnocks) entered into a contract to purchase a rural property.
- The vendor owed a considerable sum of money to a third party (Black).
- Suffice it to say, the purchasers did not lodge a caveat on the title to the property after entering into a contract to purchase the property.
- The day prior to settlement of the purchase, the third party creditor obtained a writ empowering the sheriff to seize and sell the property for the purposes of satisfying the debt owed by the vendor to the third party creditor.
- The third party creditor registered the writ on the title of the property on the day of settlement of the purchase.
- Following settlement of the purchase, the writ prevented the purchasers from being able to register the transfer on the title to the property.
- The vendor’s mortgagee was paid out at settlement and the balance of sale proceeds went to the vendor.
- Understandably, the third party creditor still wanted its debt paid and refused to remove the writ from the title unless the debt was paid by the vendor (or the purchasers!).
- The purchasers took the matter to the New South Wales Supreme Court and, following appeals, the matter was ultimately decided in the High Court of Australia.
- The High Court decided that, because the writ was registered prior to the purchasers’ (attempted) registration of the transfer, the writ defeated the transfer. This was the case despite the fact that the purchasers obtained an interest in the property (when they first entered into the contract with the vendor to purchase the property) well before the writ was registered.
- The purchasers were left with no choice but to pay the vendor’s debt to the creditors in order to have the writ removed from the title and their transfer registered.
- The High Court majority noted that the purchasers should have lodged a caveat on the title of the property upon entering into the contract to protect their interests.
While the circumstances in Black v Garnock are not common, all prudent purchasers should lodge a caveat on title to protect their interest in the property.
For all your conveyancing needs, in Victoria and New South Wales, contact the experienced solicitors and lawyers at Burt & Hanke Legal servicing Albury, Wodonga and surrounding areas.
[Black v Garnock  HCA 31 link – http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/2007/31.html?stem=0&synonyms=0&query=title(black%20and%20garnock%20)]