Introduction
When a person purchases a property, the lawyer would usually ask if he or she would like to lodge a caveat against the property. But what is a caveat?

A caveat is a legal document lodged with the Singapore Land Authority by a person with an interest in a property or land. Lodging a caveat is an optional precautionary measure which serves to prevent any further dealings with the property.

Caveats are lodged to protect interests in land which are not yet registrable. For example, a party may choose to lodge a caveat after signing the Option to Purchase or Sale and Purchase Agreement because they have an equitable interest in the land and may choose to be protected by the caveat. In this month’s newsletter, we will examine one sub-area of law which has been a constant debate globally – whether or not a right of pre-emption is caveatable?

Pre-emptive Rights
A right of pre-emption gives someone the right to be offered the chance to buy land before the
owner of the land offers it to another party. Although such a right may arise under statute, it is more commonly a contractual right within a contract agreed between parties.
A pre-emptive right is caveatable under Singapore law.

The local case of C2006J 2SCR(R)742
Although a caveat may only be lodged by any person claiming an interest in land and a pre-emptive right is not traditionally considered an interest in land, the local case of [2006] 2 SLR(R) 742 suggests otherwise.

What transpired in the case was that the plaintiffs, who purchased a number of properties from the defendants, granted the defendants such a pre-emptive right should the plaintiffs decide subsequently to sell any of the properties. Thereafter, the plaintiffs sold one of the properties in breach of agreement. When the defendants found out, they lodged a caveat against the other property which had not been sold. The plaintiffs then applied to have caveat removed.

It was eventually held by the Singapore Courts that a pre-emptive right was a form of caveatable interest at the time of creation. The judge opined that while the right of pre-emption only crystallises into an interest in land at the point of time when the owner decides to sell the property to a third party, it would be too late for the pre-emptive right holder to lodge a caveat by the time he finds out about the sale of the property, leaving the pre-emptive right holder in a relatively vulnerable position.

The Court had to consider the policy considerations in favour and against construing the right as a caveatable interest. Considerations in favors of construing pre-emptive right as a caveatable interest includes the desire to protect the holder of a pre-emptive right and providing a warning to subsequent transferees of a prior claim over the land. Considerations against construing pre-emptive right as a caveatable interest include the slippery slope argument i.e. that to recognize a right of first refusal as a caveatable interest will open the caveat machinery to other claims which have traditionally not been considered as a caveatable interest and that the right of pre-emption is not within the categories of recognizedproprietary interests in the first place.

Eventually, the judge in this case was persuaded by the former policy considerations to hold that a right of first refusal was a caveatable interest.

Conclusion
There are many different bases that one may rely on to lodge a caveat. Conversely, there are situations where a caveat can and have been lodged wrongfully. As such, it may be difficult for a layperson to establish whether or not their interest is caveatable, which may lead to unnecessary consequences such as court costs and even compensation for the wrongful caveat lodged on the property. It is therefore prudent to be well-informed when it comes to the lodgment of a caveat. If you are about to make a property purchase and would like our assistance in this area, please feel free to get in touch with us.