Caveats Over Trust Property in NSW
Does a Beneficiary Have an Interest?
A caveat is a warning recorded on title that can prevent registration of inconsistent dealings. It is powerful because it can interrupt a sale, refinance or transfer. That is also why a caveat cannot be lodged merely because someone is owed money, expects to benefit from a trust or believes a transaction is unfair.
The caveator must claim a legal or equitable estate or interest in the particular land. A personal claim against the registered proprietor is generally not enough. The caveat must also accurately state the nature of the interest and the facts said to create it.
Trust property makes the analysis especially fact-sensitive. A beneficiary of a discretionary trust ordinarily has a right to due administration and to be considered for distributions, but no fixed proprietary share in each trust asset. That status alone will not usually support a caveat over land held by the trustee.
A caveatable interest may nevertheless arise from a different source. Examples can include an express charge over the land, a specifically enforceable agreement for its transfer, a resulting or constructive trust arising from contributions or an unconscionable denial of an agreed interest, or rights under a fixed trust whose terms attach the beneficiary’s interest to the land. The deed, resolutions, payment trail, correspondence and precise equitable relief claimed must be analysed together.
Urgency follows lodgment. The registered proprietor may serve a lapsing notice under section 74H of the Real Property Act 1900 (NSW). The caveator then has a short statutory period to obtain and lodge a Supreme Court order extending the caveat. On an extension application, the caveator generally must show a serious question to be tried and that the balance of convenience favours preserving the caveat. Delay, an inadequate undertaking as to damages or a claim that can be protected another way may be decisive.
There is also downside risk. Section 74P permits compensation where a caveat is lodged or maintained without reasonable cause and causes pecuniary loss. A caveat used only as debt-collection pressure may therefore expose the caveator to damages and costs.
Before lodging, identify the exact proprietary interest, match it to the dealing being prohibited, check the title and trust instrument, assemble admissible evidence and plan for an urgent extension application. A caveat is protective relief, not a substitute for identifying the underlying right.
Sources: Real Property Act 1900 (NSW), Part 7A Division 3; NSW Supreme Court — E-conveyancing and caveats; Szozda v NSW Trustee & Guardian — 2012 NSWSC 194
Disclaimer: This article provides general information only and is not legal advice. It does not create a solicitor-client relationship.
