Can a lender use a caveat on Queensland property as security for a loan?

We often see lenders (usually from interstate) trying to secure a loan by a caveat or consent caveat on Queensland property.

The problem with this is that – unless court proceedings are commenced to establish the claim to a charge on the land and notice is given to the Titles Office – the caveat will lapse after three months even if it is lodged with the consent of the registered proprietor.

The reason for this is the terms of the Land Titles Act, and it is a little confusing. Section 126(4) of the LTA provides that if a caveator does not want a caveat to which section 126 applies to lapse, then it has to start a court proceeding and notify the titles office, within the times set out in the section. Section 125(5) says that if this is not done, then the caveat lapses.

So then we look at section 126(1), which describes when section 126 does not apply. That includes caveats where consent of the owner is lodged in the appropriate form when the caveat is lodged – i.e. a consent caveat. So one would think that includes caveats to secure sums of money? Well, actually no.

Now we go back to section 122(2) which says “However a caveat may only be lodged by an equitable mortgagee if it is a caveat to which section 126 applies”. So that means that an equitable mortgagee’s caveat can never be excluded from the operation of the lapsing provisions by 126(1). Getting confused? You are not alone.

So then to finish off, what is an equitable mortgagee? It is a person with a charge on the land but not a registered mortgage, usually where there is an agreement to give a mortgage or an agreement to charge the land in payment of a debt, like the charging clauses that are often buried in credit applications.

To make matters worse, the caveats lapse after 3 months but people don’t realise as they tend to stay on the title until they are removed. So many lenders are blissfully unaware that they have no security on the property at all.

An then let’s rub some salt into the wound. The lender cant lodge a second caveat on the same grounds without the Court giving leave.

For advice on caveats and mortgages, please contact our Property and Commercial team – Peter Muller, Jessica Murray, or Megan Hanneman.