PROPERTY LOAN ALERT
for property investors
and home buyers
Eight words make all the difference if you want a Caveat to secure a loan
A Caveat can be an effective way of securing the
repayment of loan, but only if it's valid.
When a Caveat is registered over the title to a property,
it protects the person registering the Caveat (the "Caveator").
This is because a Caveat prevents the property owner from
transferring or refinancing the property without obtaining
the consent of the Caveator.
Ta Lee Investment loaned $1.5 million to MV Developments
to buy a development site at Lane Cove. It agreed not to
lodge a caveat unless MV Developments failed to repay the
loan on time.
The development took longer than expected to complete,
and Ta Lee Investment lodged a caveat as security for
repayment of the loan.
But in the meantime, MV Development had sold the
apartment upon which the caveat was registered. The buyer
commenced proceedings in the Supreme Court to remove Ta Lee
Investment's caveat, claiming it was invalid because the
Loan Deed did not use the correct wording.
The NSW Court of Appeal ordered that the Caveat be
removed because the Loan Deed did not contain these eight
words: the property is charged with repayment of the
As a result the Caveat was invalid as security for the
The moral is, when a Caveat is used to secure a loan,
make sure you use the correct wording.
For my case note, click on
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