Is a caveat good security for an investor in a property development?

Investors can make good profits by investing in a property development.

A common situation is a land owner who owns land which is ripe for subdivision. But they are missing one vital ingredient - the money - to obtain the approvals and to carry out the site work.

They find an investor who is willing to contribute the money, not as a lender but as a joint venture partner. The investor is looking to profit share, not receive interest.

To secure their investment, the investor will enter into a joint venture agreement for property development, which provides the structure. Because the title to the property will remain in the land owner’s name (to avoid refinancing), the investor needs to protect their investment by registering a caveat over the title.

In a recent decision, the Supreme Court of New South Wales found that an investor in this situation was entitled to maintain their caveat to secure the repayment of their investment and the profit share.

For more on the decision click How do investors protect their investment in a property development joint venture?