Caveat Loan for Stamp Duty Gap on Developer Site Contracts
Caveat loan for stamp duty and acquisition cost gap on developer site contracts, Switchboard Finance
Property Lending
Caveat · Stamp Duty · Developer Site
Caveat Loan for Stamp Duty Gap on Developer Site Contracts
A senior land facility settles at 65 to 70% LVR. The developer is left to find stamp duty, GST on the contract and any balance to settle, often in a tight window from exchange. Here is how a caveat sits in that gap, and what the funder actually checks before approving it.
Quick Answer
A caveat loan can cover the stamp duty and balance-to-settle shortfall on a developer site contract by sitting in second position behind the senior land facility, then exiting through senior settlement on the same day. Approval hinges on the senior consent letter and a clean exit path.
The shape of the gap
The stamp duty and acquisition cost gap on a developer site contract is the dollar amount left over after the senior land facility funds the title, and it is almost always larger than developers expect when they sign the contract. A senior land facility funds the title at approximately 65 to 70% LVR, illustrative, and the borrower has to find duty, GST treatment on the contract and the balance-to-settle on top of that. The contract clock is usually an approximately 30 to 60 day exchange-to-settle window, varies by contract, which is short for a non-bank refinance and far too short for a senior re-pricing.
From the underwriter's seat, this gap is structurally different from the DA-to-settlement timeline question. There is no construction risk, no presales conversation, no QS report. The deal is simply: can the developer get to settlement with cash on hand plus a short, second-position bridge that exits the moment the senior lender funds.
If a developer is lining up a site purchase before EOFY, settlement before 30 June fixes the contract date in this financial year, illustrative tax-timing only, which can change the depreciation and GST picture for the project. That timing pressure is one of the reasons the gap shows up in May to June at higher volume than other months. For background on how the cash rate environment shapes senior pricing in general, see the RBA's monetary policy framework page.
What the senior land facility actually covers, and what it leaves behind
The senior land facility covers the title at a fixed share of contract price or valuation, whichever is lower, and leaves the developer to fund everything else by settlement. The shortlist of items the senior almost never funds: state stamp duty, GST on the contract where the margin scheme does not apply, the legal and disbursement costs, and any cash balance above the senior LVR ceiling. That collection of items is what the caveat is sized against.
This is the cleanest fit pattern for a second-position caveat behind senior land takeout: a defined dollar gap, a known exit date, a registered first mortgage going on at settlement and a borrower who is not depending on construction draws or presales for repayment. The shape of the deal is what makes it bankable to a specialist funder, not the developer's track record alone.
Stronger Fit
- Senior land facility conditionally approved with consent for a second caveat
- Site contract has at least 14 days runway before settlement
- Combined stack inside specialist appetite (stack varies by lender)
- Clear exit through senior settlement on the same day
- Developer has cash for legal and contingency, only the gap is bridged
Gets Tricky
- Senior land facility still in indicative discussion, no formal consent path
- Settlement date inside 7 days, no buffer for paperwork delays
- Caveat being asked to fund the deposit, not just stamp duty and balance
- Exit relies on a presale or a refinance that is not yet conditionally approved
- Combined LVR pushed above the specialist's stack ceiling
How the deal walks: a hypothetical site purchase
The cleanest way to picture this is to walk a stylised deal end to end. The numbers below are illustrative only and the structure varies materially by site, by senior lender and by state.
What makes this picture work is not the rate on the caveat, which is short and absorbed inside acquisition cost. What makes it work is the certainty of the senior settlement date and the written consent on the second-position caveat behind senior land takeout. Both have to land before the funder will release.
What the underwriter actually checks before funding
From the underwriter's seat, four items decide whether a stamp duty gap caveat funds inside the window or stalls. First, a copy of the executed contract of sale and the settlement statement so the gap is sized to the cent. Second, the senior land facility offer letter with consent for a second-position registration on the same title. Third, the first mortgage particulars, because the caveat is registered against a title that will simultaneously carry a registered first mortgage at settlement. The registered mortgage hierarchy is what tells the funder where they sit. Fourth, an exit letter or trail showing senior settlement is on track, because exit through senior settlement on the same day is the only exit being underwritten.
Where this commonly stalls is item two. Some senior lenders give blanket consent for short-dated second caveats inside their offer letter, others require a separate consent against a specific funder, and a small number will not consent at all. The right time to ask the senior is at term sheet, not the day before settlement. For the broader principle of what specialist funders look at when they sit behind a registered first mortgage, our property-secured business loan guide covers the security mechanics in more depth.
Speed on these files is mostly a function of paperwork order. When the contract, senior approval and consent letter all land together, the caveat funds inside the indicative window. When they land in dribs and drabs across two weeks, the funder is reading and re-reading the same file, and the settlement date moves. For a sense of what is operationally possible at the speed end of the spectrum, see our urgent caveat loan timing note.
The stamp duty and acquisition cost gap is a structural feature of senior land lending, not an edge case. Where the senior facility funds approximately 65 to 70% LVR, illustrative, of a developer site, a second-position caveat behind senior land takeout can size to the duty and balance-to-settle shortfall and exit through senior settlement on the same day. The deal is bankable when the senior consent is in writing, the site acquisition path is clean, and the caveat term is measured in days, not months.
Key takeaway: line up senior consent for a second-position caveat at term sheet, not at settlement, and the gap closes inside the funding window.Frequently Asked Questions
A caveat loan can cover stamp duty on a development site purchase when it sits as a second-position caveat behind the senior land takeout and exits on the same day as senior settlement. The caveat is funding the cash gap between the senior land facility, which typically funds approximately 65 to 70% LVR, illustrative, and the full balance the developer needs to settle, including duty, GST treatment on the contract and the balance-to-settle shortfall.
Specialist funder appetite varies by lender and by site quality, and the senior lender's written consent is almost always a precondition.
A caveat for a developer site settlement typically funds in approximately 5 to 14 days, indicative, when the file is clean and the senior land facility is conditionally approved. Speed is governed by how quickly the funder gets a copy of the contract, the senior approval letter and the registered first mortgage details, not by the borrower's urgency.
For background on caveat speed in general, see our urgent caveat loan timing guide.
Yes, the senior land facility lender almost always needs to consent in writing to a second-position caveat behind their first mortgage. Some senior lenders give blanket consent inside their offer letter for short-dated caveats that exit on settlement; others want to see the caveat funder's term sheet before they sign off.
The consent question is one of the first items checked on the file, alongside the registered first mortgage particulars.
Specialist caveat funders sit on a combined LVR position behind the senior land facility, typically capping the all-in stack at approximately 75 to 80% of contract price, illustrative and varies by lender. The caveat sliver itself is small in dollar terms but the funder is reading it as a stacked-on-top position, not a standalone exposure.
The cleaner the senior approval and the cleaner the exit strategy, the more headroom the caveat has inside the stack.
If the senior land facility doesn't settle on the planned date, the exit through senior settlement on the same day fails, and the caveat term keeps running with interest accruing. The remedy is usually a short extension on the caveat, varies by lender, while the senior facility resolves its own holdup.
This is the single most common stress point on these files; building in a small timing buffer at the front end materially de-risks it. For an adjacent timing pattern on the construction side, see the builder progress claim gap walkthrough.
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