Caveats Part I: Responding to lapsing notices in NSW
- Published 05.04.2022
If you have registered a caveat over property in NSW and you receive a lapsing notice, you do not have as much time to extend your caveat as you may at first think.
By operation of a NSWSC practice note, caveators are required to apply to the Duty Judge not less than five days before the notice period elapses to ensure the Court has time to hear the application and issue orders. This reduces the time you have to obtain orders from 21 days to 16 days.
Why is it important to urgently obtain legal advice?
S74J of the Real Property Act 1900 (NSW) (the Act) provides that a caveator has 21 days after being served with a lapsing notice to obtain an order extending the operation of the caveat and lodge it with the Registrar General.
If a caveator fails to obtain an order and the landowner provides the Registrar General evidence that the lapsing notice has been served on the caveator, the caveat will automatically lapse and be removed from the title. The consequence of this occurring is significant because the Act prevents a second caveat being lodged on the same grounds without leave of the court.
If a caveat lapses and the secured property is subsequently sold, the creditor also risks losing priority to competing caveators.
In the intervening period between receiving a lapsing notice and obtaining an order from the NSWSC, there are a number of time-critical steps and strategic considerations which require particular legal expertise. They include:
- negotiating with the registered proprietor to agree on terms (including to settle a secured debt);
- complying with the practical steps for applying to the NSWSC to maintain a caveat; and
- lodging the court order with the Registrar General before the 21 day period expires.
It is important for caveators to obtain legal advice to ensure that they respond to a lapsing notice effectively by taking all the necessary steps and considerations required by the process.
Steps required in applying to extend a caveat
Applications to extend the operation of a caveat are made by way of summons with a supporting affidavit.
In effect, the application seeks an order that operates in a similar way to an injunction. It restrains the landowner from dealing with the land pending the substantive trial of the caveator’s claim.
Similar to seeking an injunction, the caveator is at risk of being required to compensate the land owner if they are unable to substantiate their interest in land.
NSWSC rules and requirements
The NSWSC has issued a practice note setting out the Court’s expectations in relation to urgent applications for injunctive relief, including:
- requiring any application to be made no less than five days before the expiration of the lapsing notice, unless special circumstances exist;
- the caveator notifying the landowner in advance of the application;
- the caveator seeking agreement as to undertakings from the landowner; and
- only applying for an urgent final hearing in circumstances where it is not possible to reach an agreement on an interim injunctive regime to facilitate the substantive matter being heard promptly.
The practice note requires these steps to be completed and the application filed within a maximum period of 16 days.
By operation of the legislation and practical requirements of the court, caveators are under significant time constraints to take several complex legal steps after being served with a lapsing notice to ensure their caveat does not lapse.
If you have received a lapsing notice, seek our assistance to ensure your caveat does not lapse and your security interest remains protected.