New Zealand Law Society - Caveats on property deemed to be unlawful

Caveats on property deemed to be unlawful

Lawyers are reminded that caveats on property can only be registered in very limited circumstances. A recent decision of a Standards Committee held that registering a caveat to exert leverage in advancing a Family Protection Act claim was improper. Lodging the caveat in those circumstances amounted to unsatisfactory conduct by the lawyer.

The lawyer was held to have breached rule 2.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC), by using a legal process for an improper purpose. The lawyer was required to pay compensation to the complainant of $1,250 and costs of $500 to the New Zealand Law Society | Te Kahui Ture o Aotearoa.

Family Protection Claim against an estate

The lawyer acted for an individual who had made a Family Protection Claim against the estate of her late mother. The only asset of the estate was a property. The property was distributed to another family member who was the executor of the estate.

The lawyer’s client was concerned that the property would be sold, and the proceeds disposed of without reference to her. The lawyer lodged a caveat against the property, allegedly on the instructions of his client.

The other family member (the executor) lodged a complaint, which was heard by the Standards Committee.

The Standards Committee’s decision

The Standards Committee observed that a caveat can only be registered in very limited circumstances, as set out in section 138(1) of the Land Transfer Act. In the committee’s view, there were no such grounds to register a caveat, which the lawyer ought to have known.

It stated, “There must be a proper basis for registering a caveat and it is improper to register a caveat to exert some kind of leverage as part of advancing a proposed Family Protection Act claim, as was the case here.”

The Committee held that by registering the caveat the lawyer used that legal process for an improper purpose in breach of rule 2.3 of the RCCC. It considered that there were other legal processes available to the client as shown by her later actions.