Caveat Loans: Fast Funding, But Know the Risks (Copy)
Private lending insights from Hedwig Legal by Jack Meredith.
What Is a Caveat Loan?
A caveat loan is a short-term lending solution where the borrower (or guarantor) grants an interest in their real estate to the lender. This enables the lender to lodge a caveat — a legal notice — on the property’s title as a way to protect their interest.
Unlike a registered mortgage, which grants legal enforcement powers (like the right to sell the property), a caveat is a warning mechanism that alerts other parties to the lender’s claim.
What Is a Caveat?
A caveat is a notice on a property’s title that prevents the owner from transferring or selling it without the caveator’s consent. It doesn't provide a right to possess or control the property — it simply prevents dealings with the land.
Caveats are typically used where the lender has an unregistered mortgage or charge, and acts as a placeholder while formal registration is pending or not pursued.
Why Are Caveat Loans Popular?
For private lenders and borrowers in urgent need of funds, caveat loans offer flexibility and speed. Here's why:
✅ Rapid turnaround – Funds can be advanced quickly without the delays of bank processing.
✅ Minimal red tape – Lenders don’t need prior consent from existing mortgagees or interest holders.
✅ High-risk tolerance – Lenders often accept higher loan-to-value ratios and limited documentation in exchange for higher interest rates.
✅ Ideal for bridging or mezzanine finance – Used to cover short-term cash flow gaps or complete property settlements or developments.
Common Risks and Misconceptions
It’s important to understand that a caveat does not equal security.
❌ It does not give a lender power of sale.
❌ It does not create priority on its own.
✅ It is simply a notification of a claimed interest — not a legally enforceable mortgage.
To enforce rights (e.g. repossession or sale), lenders must either:
Register a mortgage (which often requires third-party consent), or
Obtain a court order based on their unregistered interest.
Priority Risks
One of the biggest risks is losing out on priority:
A caveat only flags a claimed interest.
A registered mortgage takes precedence, even if it was lodged later.
If your mortgage isn’t registered, you risk falling behind other creditors — even if your loan was first.
How Can You Protect Your Position?
At Hedwig Legal, we help both lenders and borrowers ensure their caveat loans are structured for speed and security — with an understanding of the risks.
We offer:
✅ Advice on loan and security documents
✅ Preparation of mortgages, charges, and caveats
✅ Guidance on priority and enforcement rights
✅ Support in disputes, defaults, and recoveries
Thinking of a Caveat Loan? Get Expert Legal Support.
Whether you're a private lender, broker, or borrower, caveat loans can be powerful tools — but only when supported by sound legal documentation and risk awareness.
Hedwig Legal can help you structure the deal, protect your rights, and act quickly when time is of the essence.