A notice given to a legal authority not
to do something until the person giving
notice can be heard. The word caveat is
derived from the Latin verb caveo
meaning to beware.
In regard to the registration of real
estate interests, a caveat is a statutory
notice of a claim to an interest in a parcel
of land or to a mortgage, encumbrance, or
lease that affects the land. A caveat is a
warning to the individual investigating the
title that someone other than the owner is
claiming an interest in that parcel of land.
Any person dealing with the land after the
registration of a caveat is subject to the
interest being claimed, which may or may not
be valid. However, if its validity is
disputed by the owner, but upheld by the
courts, any person dealing with the land
after registration of the caveat is subject
to the interest claimed.
The effect of a caveat on the market
value of a property will depend on the
interest that forms the basis of the caveat.
Usually, a caveat will not directly affect
market value. It may, however, affect the
marketability of a property, that is, the
ability of the owner to sell it.
Example of Caveat
Examples of interests that might be
registered by caveat include: a tenant’s
leasehold interest, unpaid liens, option to
purchase, agreement for sale, assignment of
a lease as security, easement, right-of-way,
party wall agreement, shared wall agreement,
development agreement, encroachment
agreement, unregistered mortgage, building
restrictions, restrictive covenants, or a
zoning agreement.
A long-standing legal principle (Latin
for let the buyer beware), based on the
concept that the buyer is buying at his/her
own risk and, consequently, places a
responsibility on that buyer to inspect and
establish the terms for what is being
purchased. The seller cannot be held
responsible for the quality of a product
unless express warranties have been given.
Courts, however, are reticent to allow
sellers the benefit of caveat emptor in the
case of non-disclosure of a material fact
that is not readily apparent in a normal
viewing by a buyer.
Caveat emptor is a continuing source of
debate in listing and selling property.
Recently, disclosure statements have gained
popularity among practitioners and consumers
to identify significant issues regarding
listed properties, e.g., legal, structural,
and environmental matters. A buyer should
request a disclosure statement from the
seller to protect himself/herself in a real
estate transaction. If a serious problem
then occurs with the property that was not
disclosed in the disclosure statement and
not readily evident to the buyer when he/she
viewed the property, the seller may not rely
on caveat emptor in a possible lawsuit.
Obviously, the decision by a court will rest
on individual circumstances and the overall
merits of a particular case.
Example
of Caveat Emptor
A buyer elects to purchase a home
directly from the seller without the use of
either an agent or legal counsel. The seller
clearly states that the property is being
sold as is, and that the seller is not
providing any warranties or representations
concerning the condition of the property.
The buyer is purchasing under the principle
of caveat emptor. However, the buyer may
have some protection in this case since the
courts may not allow the seller to avoid
disclosing a material fact to the buyer that
the seller knows about, but which is latent,
or undetectable, on close examination by the
buyer.
Caveat emptor is most frequently in
evidence relating a real estate auction,
disposition by power of sale, or municipal
sale for unpaid taxes.
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