What is a caveat?

A caveat is a caveat-able interest in property lodged at LINZ to protect an unregistered interest in the property.

When a lender refers to a caveat they refer to an ‘agreement to mortgage’ entered into by a guarantor. This in itself is not a piece of security but the right for the lender to oblige the guarantor to enter into an agreement (ie the mortgage).

When the caveat is registered with LINZ it will prevent the property being sold or a mortgage being taken over the property without the lender’s consent.

Does a guarantor need to provide security for a guarantor loan?

In some cases a guarantor will need to provide security to support a loan. This may be a Specific Security Agreement over a specific piece of security, a caveat or a mortgage.

What security is required?

As the name indicates, no security is taken for an unsecured loan.  There is a loan agreement with the company and a guarantee by its principals.   

Nothing is loaded on the PPSR for an unsecured loan.

For a secured loan security may include a specific security agreement over certain assets, a general security agreement over the company or a mortgage over property.