Consent Caveat or Mortgage?

So you have decided to make a short term loan and want to take some security over Queensland property owned by the borrower. You dont want to spend a lot of money, and the borrower offers to consent to a caveat. Sound good?

No.

First, it costs nearly as much to put a caveat on a property as it does a mortgage, so any savings are going to be very limited.

Second, a caveat itself does not regulate rights of sale, it only prevents dealings being registered. So enforcing the security is always going to cost more and be more complex.

Third, if it is securing a sum of money a prior mortgagee exercising power of sale will always trump the caveat, so it gives no better security.

Fourth, a caveator cannot consent to dealings unless they are specified in the caveat itself. As a result, if the caveator/lender wants a dealing registered which would enhance the value of the land (eg a lease), then unless it is specified in the caveat, the caveat has to be withdrawn. It cannot be re-lodged on the same ground.

Fifth and most importantly, if the caveat is securing an obligation to pay money, then unless court proceedings are started to establish the claims made in it (and notice is given to the Title Registry of those proceedings in the form they require) it lapses after three months regardless of whether it has the consent of the owner. This is a very different position to (say) New South Wales. As a result, after three months the security is gone unless the litigation has been commenced and notified appropriately, which would cost a lot more than it would have to lodge a mortgage in the first place.

Caveats in Queensland have peculiarities not shared with other states and must be treated with caution. For advice on caveats, please contact Peter Muller at peterm@qbmlaw.com.au or Justin Mathews at justinm@qbmlaw.com.au.