How to lodge a caveat over a property

When it comes to civil litigation, whether or not a defendant owns land often determines if it is worth incurring the legal cost of suing that defendant.

However, even if the defendant owns land, Court proceedings can take a long time. Therefore, there is a risk that the defendant can sell their land and dissipate the sale proceeds before the final Court trial can take place.

In order to prevent this from happening, the plaintiff can lodge a “caveat” over the title of the defendant’s land. A “caveat” prevents the owner of the land from selling that property, registering a mortgage or dealing with that land in any way.

However, it is not possible to lodge a caveat without a proper reason. The plaintiff must have a “caveatable interest” in order to justify a caveat.

For example, the mortgagee of a land given as security has a caveatable interest. This means if a borrower has given their land as a security interest to obtain a loan, then the lender can lodge a caveat on that land.

Further, a purchaser of a property can lodge a caveat on that land prior to settlement. A purchaser might want to do this if the sale has a very long settlement date, such as 6 months to a year. Doing so will prevent the risk that the vendor re-sells the property to another innocent buyer for a higher price prior to the settlement date.

However, you are not permitted to lodge a caveat on someone’s land just because that person owes you money. An unsecured debt is not a caveatable interest.

Similarly, a shareholder of a company is not entitled to lodge a caveat over land owned by the company. The law has made it very clear that the assets of the company do not belong to the shareholders. Therefore, mere shareholding does not give a person a caveatable interest over the company’s land.

If you have any questions about New Zealand property law, speak to us at Capstone Law, and we will be happy to assist you.