FiveAA Radio: Caveat property issues in South Australia

On 5AA, we talk about caveat risks and the need to seek legal advice, even before applying to have a caveat removed.

5/10/12

Transcript of discussion:

(Byner: About 10 days ago we had a lady who called us who’d rent to purchase a solar system for her house … she wasn’t behind in her payments … on checking found that there was a caveat placed on her property. Now, she claimed that she never knew this was going to happen. Obviously had she gone to a lawyer to read the contract he or she would have said ‘Hey, there’s a caveat on this’ … the caveat basically placed on a property means that if you seek to dispose of it, until that caveat is removed there’s not much you can do. Now, she was wanting to do a whole lot of things which the bank said ‘We can’t do until you get the caveat off’. Now, we made some discreet enquiries and John Rau the Attorney-General told us on this program that he regards dimly any company such as a solar company, and they’re not the only ones by the way and not all solar companies are doing it … but the idea that you secure the asset by putting a caveat on somebody’s house whose value is just infinitely greater than the debt is somewhat a sharp practice. Now what John Rau said was … if there are people who’ve had caveats put on their properties in this manner, they seek to lift them by going back to the person who put the caveat on and they say no, he wants to know about it because he on behalf  of the state, and he said he spoke to the Solicitor-General, will actually advocate against the person who put the caveat on in favour of the consumer … what John Rau also said was that the people who do this are basically claiming an interest in the land that they do not have … this has caused somewhat of a furore because there are 24,000 applications for caveats in the Land Titles Office and I’d still like to know if that’s the view of the Attorney-General and the Solicitor-General, which it appears to be, how come Lands Titles have been granting these caveats? Anyway … Julie Height … tell us the issue here.)

… firstly I must congratulate you on the fantastic support that you’re giving the consumers on this issue. Consumers are obviously faced with the difficulty of seeing this caveat on their title and not being able to deal with their title thereafter until they withdraw that caveat. My view is that a supplier needs to have some type of security obviously for the repayment of their debts but … a caveat is likely to be disproportionate to the debt they’re trying to secure and perhaps more appropriately they should be looking to secure that with some type of retention of title over the equipment and that perhaps being registered on the personal property security register. But that being said … the homeowner’s then faced with what they do with this caveat … logistically the process may seem fairly simple: the homeowner can simply got to the Land Titles Office and complete a pro forma application to remove the caveat and pay a small fee of $144. There’s a reason that that’s particularly dangerous … whilst it’s the procedure to be adopted, before that is adopted the homeowner should really obtain appropriate advice … because once the application’s lodged, upon the elapse of 21 days that caveat will automatically come off of the title. So that really forces the caveator, and in this case the suppliers, into a corner to either fight now or forever walk away essentially. If they’re going to fight it, and that is to prove that they have a caveatable interest against the title, they’ll need to apply to the Supreme Court or the District Court for an extension of time within which to remove the caveat and that process alone, you know, the Supreme Court filing fee’s over $1,000, the legal fees associated with that will be … $5,000 to $10,000 …

(Byner: … let’s say your average consumer … go to the Lands Titles to get it taken off and then the other company wants to push the envelope, are you telling me that the danger is you could be up for their costs?)

Oh absolutely … if the court determined that there was a caveatable interest, and this is beside whether the debt is payable or not, but if there is a caveatable interest then the risk is … that the costs will generally follow the event.

(Byner: … John Rau has already said that he thinks that the companies that do this are claiming an interest in the land they don’t have.)

Well that’s really hard for me to comment without seeing the terms or the specific terms of the contract … it is a fairly difficult topic to determine whether one has a caveatable interest or not … there’s certain charging clauses that suppliers can have in their terms of engagement which would be sufficient to create the caveatable interest in one’s title and at the end of the day that’s the only question that the court are concerned about, is there a caveatable interest?

(Byner: … let’s say you’re presented with a company that offers to do something on a rent purchase plan and they’re not going to use the consumer mortgage system which you’re referring to … or they’re adding to it by using caveats, one thing John Rau said as also Consumer Affairs Minister was if you don’t like that you can simply cross it out and initial it and unless they come back and challenge you it therefore it deleted from the contract.)

Well not necessarily, I mean the usual terms of contract apply in that situation … both parties need to consent to that amendment. So if the supplier has already signed … and you cross out that then you’re amending the terms after the event so I think that that would be quite difficult. Often these terms and conditions are not negotiable …

(Byner: Alright, so what’s your advice to consumers here?)

Obviously read the fine print … I’ve seen in previous articles or transcripts that Rau has suggested if you see the word ‘caveat’ certainly be aware, but there’s other terms that might also alert the consumer and they include a charge which effectively will have the same effect, it may create a caveatable interest … if you are faced with a caveat being lodged against your title don’t simply make an application to remove that; obtain appropriate advice in the first instance and deal with the issue that supports that … at the end of the day all both parties are really concerned about is the payment of the debt and the payment of the services. So concentrate on that … of course the caveat will eventually come off when that matter is dealt with, but to simply just make an application without attempting to deal with that issue first backs the supplier or the caveator into a corner and if they want to protect that then they’ll be making quite an expensive application to the courts.

(Byner: … thank you … remember that John Rau also said … if you have a caveat on your property … the first thing you should do is contact them and say ‘I want you to lift this caveat’. If they say no, you talk to us immediately … we will put you in touch with John Rau’s office, and he’s requested this, and he and the Solicitor-General will go into bat for you and if it’s got to go to court to create a precedent then they’ll be happy to do that on your behalf. So I guess the industry, and as I said it’s not just solar companies that do this, there are other companies doing  it … if you’re in that scenario that we describe and you need assistance it is there and we can get it tested … isn’t it sad that these ideas often that come out of the United States which are terribly sharp … put you the consumer at an extreme disadvantage … the pressure on which you’re under to do the very thing to rent to purchase is created by ridiculously high power prices.) 

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