Limitations of Caveats on PEXA
As conveyancing continues on the path of full digitisation with the majority of property transactions being completed on an Electronic Lodgement Network (ELNO) such as PEXA, there still remains certain limitations of the lodgement networks that may present some unwanted issues for both buyers and conveyancers.
In the recent case of Brose v Slade [2022] NSWSC 1785 there was a dispute between parties over an interest in land pursuant to a Deed of Family Arrangement in which the Plaintiff’s brought an application before the Court under s74K of the Real Property Act (RPA) to extend the lapsing of two Caveats lodged over certain properties owned by the defendant.
The problem was that the caveat securing the interest that was lodged via PEXA did not provide the appropriate drop down option to select the relevant “caveatable interest” being claimed and as such, the caveat was arguably – defective. This subsequently brought to light the potential limitations of the PEXA network and a caution to practitioners and conveyancers lodging caveats on PEXA where the relevant interest is not properly noted.
Before we dive any further, what is a caveat?
What is a Caveat?
In simple terms, it is a form of injunction (restraint) that prevents the registration of dealings and plans on the title of a property. They are ordinarily lodged and recorded with the Registrar-General for the purpose of protecting an interest in land. However, just because you think you have an interest in the land does not necessarily mean that you do and it definitely does not mean you can automatically register a caveat. This continues to remain a common misconception.
“Only a person who has a legal or equitable interest in land … has a caveatable interest” [Sandra Boyle]
Circumstances of the case
In the Slade case, the interest claimed on the Caveat was an “Estate in Fee Simple” and the claim Category “Beneficial Interest in Trust”. Technically, this was not correct as the interest held by the Plaintiffs was “an equitable estate or interest in the land in the nature of a constructive trust”. Under the PEXA framework, there is no Category for a constructive trust.
The Defendants argued that the Caveat was rendered void as the validity of the Caveats were not lodged in compliance with s74F and/or cl7 and/or schedule 2 of the RPA .
The Plaintiff’s counter argued, that the court should disregard any failure of the caveator to comply strictly with the requirements of the RPA on the basis that there was no option available and that there was no other way to register the Caveat.
Whilst the Court ultimately found that the misdescription of the caveat did not render the caveat in question invalid, the judge did identify the limitations of the drop-down options in the ELNO and cautioned practitioners of the risk in relying on the Court’s discretion to overcome any deficiency.
The Court also made comment that the frequency of such claims seems to raise a systematic issue of the system which will be referred to the Minister for Customer Service and Digital Government for investigation so that the PEXA forms and processes can be amended/updated.
Implications and take aways
In the ever complex area of conveyancing and caveats, whilst the PEXA network has been beneficial in streamlining the registration process on the one hand, it remains limited by the technological constraints of the network. Unfortunately, not every valid “caveatable interest” is accounted for on the network and it is extremely important that buyers and conveyancers alike, take caution when lodging a caveat to ensure the appropriate interest is being claimed. Remember, just because the dropdown options doesn’t list the interest on PEXA, this does not automatically mean the interest does not exist. In fact, it is important to be aware that caveats can still be lodged as a “Dealing with exception” for any other interest not noted – which is the recommended interim solution on PEXA.
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** The above article is provided for information purposes only and does not constitute advice. We recommend that you speak to us directly about your individual circumstances.
