Introduction

With regards to land, Singapore utilizes the Torrens land registration system. This system is built upon two main components: the land register, which provides a definitive record of land ownership, and the caveat mechanism, which safeguard interests that cannot be immediately registered.

The caveat system serves as a protective measure for interests in land that cannot be immediately registered. The primary function of the caveat, likened to a statutory injunction, is to prevent the registration of dealings which would adversely affect the right of the caveator without first giving him a chance to prove his claim. It also acts as a public notice to anyone searching the register that there is an existing interest that needs to be taken into account. This prevents any dealings with the land that might otherwise infringe on these unregistered interests.

So, when can a caveat be lodged over a property?

A caveat can be lodged, inter alia, in the following circumstances:

Sale and Purchase Agreement

The most common scenario involves lodging a caveat when there is an agreement for the sale and purchase of land. In such cases, the purchaser’s interest under the land sale contract is recognized as an equitable interest in the land. When a valid and binding land sale contract exists, this equitable interest transfers to the purchaser, thereby providing them with a legitimate interest in the land that can support a caveat. This ensures that the purchaser’s interest is protected, preventing the vendor from dealing with the property in a manner that might undermine the purchaser’s rights.

Option to Purchase

A person who is granted an option to purchase by the registered proprietor of the property is considered to have an equitable interest in the land. This equitable interest arises from the contractual right to purchase the property at a future date under specified conditions. Consequently, the option holder may protect this interest by lodging a caveat over the property. By doing so, the caveator ensures that their interest is recorded and provides notice to any potential purchasers or parties dealing with the property, effectively preventing any transactions that might compromise their rights under the option agreement.

Mortgage

A mortgagee, such as a bank, can lodge a caveat to safeguard their interest in the property secured by the mortgage. This caveat serves as a formal notice on the property’s title, indicating that the mortgagee has a claim or interest in the property. By lodging a caveat, the mortgagee ensures that any potential sale, transfer, or other dealings with the property cannot proceed without their knowledge and consent.

The rationale behind this is that the mortgagee’s interest is secured against the property as collateral for the loan. Therefore, any transaction involving the property that might affect its value or the mortgagee’s ability to recover the loan could jeopardize the mortgagee’s security. The caveat thus acts as a protective measure, preventing the property from being sold or otherwise dealt with in a manner that might undermine the mortgagee’s security interest. This helps to preserve the mortgagee’s rights and ensures that they are in a position to enforce their claim should the borrower default on the loan.

Pre-emption Rights

A right of pre-emption gives someone the right to be offered the chance to buy land before the owner of the land offers it to another party. Although such a right may arise under statute, it is more commonly a contractual right within a contract agreed between parties.

Although a caveat may only be lodged by any person claiming an interest in land and a pre-emptive right is not traditionally considered an interest in land, the local case of Ho Seek Yueng Novel v J & V Development Pte Ltd (also referred to as “Novel Ho”) suggests otherwise.

In Novel Ho, the plaintiffs purchased several properties from the defendants and granted them a pre-emptive right to purchase should the plaintiffs decide to sell any of the properties in the future. However, the plaintiffs subsequently sold one of the properties in breach of this agreement. Upon discovering this, the defendants lodged a caveat against another property that had not been sold. The plaintiffs then applied to have the caveat removed.

The Singapore Courts ultimately held that a pre-emptive right constituted a caveatable interest at the time of its creation. The judge noted that while the right of pre-emption only crystallizes into an interest in land when the owner decides to sell the property to a third party, it would be too late for the pre-emptive right holder to lodge a caveat upon discovering the sale, leaving them vulnerable.

The Court had to weigh policy considerations for and against construing the right as a caveatable interest. In favor of recognizing a pre-emptive right as a caveatable interest were the desire to protect the right holder and to provide notice to subsequent transferees of a prior claim on the land. Against this were concerns that recognizing a right of first refusal as a caveatable interest could lead to other non-traditional claims being considered caveatable, and that a right of pre-emption is not typically a recognized proprietary interest.

Ultimately, the judge was persuaded by the policy considerations in favor of recognizing a pre-emptive right as a caveatable interest and held accordingly.

Interest in Matrimonial Property upon Divorce

Depending on the stage of divorce proceedings, an interest in matrimonial property may suffice to support a caveat. During divorce proceedings, parties may have claims to certain assets, including matrimonial property, which are subject to division by the court.

In such cases, a caveat can be lodged to protect a party’s interest in the property until the final division of assets is determined. The rationale for this is that the caveat serves as a precautionary measure to prevent any disposition or transfer of the property that might undermine the claiming party’s rights.

A caveat lodged in this context ensures that the property cannot be sold, transferred, or otherwise dealt with without the caveator’s consent or without resolving the claims made in the divorce proceedings. This protects the claiming party’s potential entitlements by maintaining the status quo of the property until the court issues a final order on how the property should be divided.

The caveat thus functions as a safeguard to prevent any actions that could adversely affect the equitable distribution of matrimonial property, ensuring that all claims are properly addressed and resolved before any changes to ownership or status of the property are made.

Wrongful Lodgement

Since a caveat can be lodged by anyone claiming an interest in land without the Registrar assessing the validity of that claim, it is crucial to have mechanisms in place to prevent abuse of the system by registered proprietors.

To address this, the caveatee (the person against whom the caveat has been lodged) can request that the caveator appear before the court to justify why the caveat should not be withdrawn or removed. The court may then issue an order, either ex parte or with notice, as deemed appropriate.

If the caveatee believes that the caveat has been lodged vexatiously, frivolously, or in bad faith, they may file a statutory declaration with the Registrar to this effect. The Registrar will then notify the caveator of the intent to cancel the caveat. The caveat will be cancelled unless, within 30 days of receiving the notice, the caveator provides the Registrar with a court order to the contrary or presents satisfactory evidence demonstrating why the caveat should not be cancelled or should be deferred.

If the Registrar, after notifying the caveator of the intention to cancel the caveat for these reasons, does not proceed with the cancellation, they must inform the caveatee of the withdrawal or extension of the notice.

During the notice period, the caveator may apply to the court for relief. The court will then make an order that it considers just under the circumstances.

Conclusion

In summary, a caveat plays a crucial role within Singapore’s Torrens land registration system, offering protection for various interests in land that may not yet be formally registered. By acting as a statutory notice, a caveat ensures that any dealings with the land are conducted with awareness of the caveator’s interests, thereby preventing adverse actions that could undermine these claims.

At the same time, it is also possible for a caveat to be filed incorrectly. This can make it challenging for someone without legal expertise to determine whether their interest qualifies for a caveat, potentially leading to unnecessary consequences like court costs or compensation for an improperly lodged caveat. Therefore, it’s wise to be well-informed about the caveat process. If you’re about to purchase a property and need help with this, don’t hesitate to reach out to us.