Can a property be sold if it has a caveat?

You have polished the garden, booked the auctioneer and printed glossy brochures, only to discover a surprise line on your title search: "Caveat ‎No. AB123456F". If you are selling property in Melbourne, that single word can stop the sale in its tracks. In this article we explore what a caveat is, why it appears, whether you can still sell, and the practical steps to clear the roadblock.

What Exactly Is a Caveat?

A caveat is a formal notice lodged at Land Use Victoria that signals someone other than the registered proprietor claims an interest in the land. Think of it as a red flag that says "do not deal with this title until my claim is resolved". The Registrar of Titles will refuse to register most dealings, including a transfer of land, while the caveat stands.

Common Reasons People Lodge Caveats

Purchasers secure their equitable interest between contract and settlement
Mortgagees or private lenders record their security when a formal mortgage is not yet registered
Former partners protect property until a family law settlement
Tenants with long leases or anyone holding an unregistered easement may also lodge

Only someone with a "caveatable interest" may file; lodging without genuine grounds can invite damages.

How Does a Caveat Affect the Sale Process?

In practical terms a caveat freezes registration. You can advertise and even sign a contract, but you cannot complete settlement because the transfer will be rejected by Land Use Victoria. Lenders will decline finance because they cannot take clean security, and prudent buyers will steer clear until the caveat is gone.

Can You Still Sign a Contract While a Caveat Exists?

Yes, but it is risky. The contract must give the vendor enough time to remove the caveat before settlement or allow the purchaser to rescind. Most conveyancers will advise inserting a special condition or, better yet, clearing the caveat first to keep goodwill with bidders.

Options for Removing or Managing a Caveat

Voluntary Withdrawal

Timeframe: 1-3 days once parties agree
Who initiates: Caveator
Cost: Filing fee + professional fees

The simplest route. Your conveyancer drafts a Withdrawal of Caveat form, the caveator signs, then lodgement clears the title within a day or two.

Section 89A Notice to Lapse

Timeframe: 30-40 days
Who initiates: Registered proprietor or mortgagee
Cost: Filing fee + solicitor fees

You ask the Registrar to serve formal notice on the caveator. If they do not commence proceedings within 30 days the caveat lapses automatically.

Supreme Court Application

Timeframe: 2-6 weeks (urgent)
Who initiates: Registered proprietor
Cost: Court filing + legal costs

Used where the caveator will not withdraw and time is tight. The Supreme Court can order immediate removal, often with cost consequences.

Agreement at Settlement

Timeframe: Same day
Who initiates: Vendor & caveator
Cost: Often nil if funds exchanged

Common where the caveator is, say, the purchaser under an earlier contract. Funds are exchanged and the caveator withdraws simultaneously.

Your Duty to Disclose in the Section 32 Vendor Statement

Victorian vendors must provide a Section 32 statement disclosing "any encumbrance" on title, including caveats. Failing to mention an existing caveat gives the purchaser a right to walk away (and possibly sue for losses). Engage your conveyancer early so the statement is accurate before the property hits Domain or RealEstate.com.au.

Timelines and Tips for Melbourne Sellers

Order a title search the moment you decide to sell
Contact the caveator immediately if a caveat appears. A phone call often unearths a simple fix
Build extra time into your campaign. A Section 89A process takes at least a month
Keep buyers informed. Transparency prevents last-minute panic and maintains trust
Work with a local conveyancer who uses PEXA. Electronic lodgement means a withdrawal can be processed within hours once signed

What Happens If You Ignore the Caveat?

Attempting to settle without removal will fail; the Registrar will refuse to register the transfer. The purchaser may rescind, demand their deposit plus interest and claim damages for wasted costs. Your marketing spend is lost, momentum evaporates and the property can become stigmatised in a thin winter market.

Steps Purchasers Should Take

Always order a pre-contract title search – it costs under fifty dollars and reveals caveats, mortgages and restrictions
Insert a caveat removal condition giving the vendor a clear deadline
Notify your lender early – most banks will not issue unconditional approval until the caveat is gone
Consider lodging your own protective caveat once the contract is signed, especially on long settlements

Case Study: Albert Park Townhouse

Sarah and Tom listed their Albert Park townhouse for $1.8 million. Five days before auction their conveyancer spotted a caveat lodged by a past builder for disputed extras. A quick call confirmed the invoice had been paid but the builder never withdrew the caveat. The parties signed a Withdrawal of Caveat before a JP on Wednesday, the conveyancer lodged electronically on Thursday and received confirmation Friday morning. The auction went ahead, the hammer fell at $1.92 million and the buyers settled on time. Total cost: $129 in Land Use Victoria fees and a modest legal invoice far cheaper than postponing the auction.

Key Takeaways

A caveat does not transfer ownership but it effectively freezes the title of Victorian land
You can market and even sign a contract, yet you cannot settle until the caveat is cleared
The quickest solutions are voluntary withdrawal or an agreement at settlement; failing that, Section 89A or a court application will force removal
Always disclose the caveat in your Section 32, or risk the deal falling over
Early title searches and experienced conveyancing support save stress, time and money

Conclusion: Clear the Roadblock Before You List

A caveat is not the end of your sale, but it is a hurdle you must clear before the keys change hands. The earlier you act, the smoother your campaign will run and the more confident your buyers will feel.

For tailored advice and hands-on help in removing caveats, drafting rock-solid contracts and sailing through settlement, contact Pearson Chambers Conveyancing today for a free Section 32 review.

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au