The Real Estate Agents’ Guide to Residential Property Titles & Registered Interests

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With the introduction of the new REAA code, there is an obligation placed on agents to be able to understand titles and any registered interests on the titles of all properties you are listing. A registered interest is an item listed on the title below the registered proprietors.

The purpose of this article is not so you can give prospective purchasers legal advice. We strongly recommend you steer clear of that. But we hope that this article will give you a better understanding and will help you identify some potential red flags when you are listing a new property and/or drafting the description of the property to accompany your listing.

Please note that this is not an exhaustive list of possible interests and the title is not the only thing that may cause issues (e.g. the contents of LIM reports can also contain restrictions). However, in this article we will address some of the most common interests found on titles.

Easements
Easements usually grant a right for the owner of land to do something on someone else’s land. The land that has the benefit of the right is called the dominant tenement/land. The land that the easement runs over or across is called the servient tenement/land.

On a title you will see easements either referred to as “Appurtenant hereto…” (which means this is the dominant land) or “Subject to” (the servient land).  The most widely used easements create rights in respect of water supply, drainage, electricity and rights of way.

Easements between neighbours are the most common. However, there are also easements in gross. These usually refer to companies or Council who may need access to the land to provide a service, e.g. Vector installing underground cables.

Important things that could catch you out:

    1. Easements do not create exclusive use rights for the owner of the dominant land. The owner of the servient land can still use that part of their land as long as it does not interfere with the rights under the easement.

    2. Easements may not be easily removed from the title, especially where the land does not have road access or if the easement was a condition of subdivision consent.

    3. If the land has an informal agreement between neighbours but there is no easement on the title, the prospective purchaser will not necessarily be able to continue to enforce those rights after settlement.

Land Covenants – Restrictive or Positive
Covenants are contained in other documents such as a transfer. Usually a developer might register them on the title so that once the land is sold to builders; the builders have to comply with certain requirements. Examples are the types of materials that the dwelling is made from, the height the dwelling goes to so that other houses in the development are not impeded.

Important things to be aware of:

    1. Generally a house will already be built when the prospective purchaser comes along, so the main thing they will need to check is that the house complies with all of the land covenants.

    2. If the purchaser asks questions like, “Can we build a second storey?” “Can we paint it a different colour?” “Can we plant a huge pine tree?” you should take caution when answering.

Consent Notices
A Consent notice is a document registered on a title by Council, generally, as a condition of a subdivision. It will contain restrictions or obligations that are placed on the property owner.

Examples are that you can only build a dwelling in a certain area, you cannot remove certain parts of the surrounding bush, or you must fence a certain area of the property if you wish to keep animals on the property etc.

Important points to look for:

    1. Consent notices can restrict things like the number of dwellings that may be built on the land. So, for example, you should not say things like “has the potential to be subdivided” just because the land is big enough.

    2. More relevant to a vacant lot that has just been subdivided, consent notices may also restrict where on the land you can build so make sure you don’t make any representation in respect of this when talking to prospective purchasers unless you are 100% sure.

Caveats
A caveat gives the person who registered it (the caveator) the ability to protect an existing right or claim they have in respect of the property. The main class of caveat we deal with is a caveat against dealings, basically meaning the land cannot be mortgaged, sold or transferred without first removing that caveat.

Important things to note:

    1. A caveat is effectively giving notice that some other person or entity has a claim over the property so this can cause problems for the vendor on settlement.

    2. The vendor may have to pay out the caveator from the sale proceeds so you should have a discussion with the vendor about the caveat – the main thing is whether or not they will be able to afford to repay the caveator (as well as any mortgagee, your commission and any other associated sale costs).

Cross Leases
Lease instruments registered on cross lease titles are vital documents in respect of the property. They govern the relationship between the owners of all of the properties within the cross leased land. There are generally standard forms of lease that are used, however, you should always search the lease document as it can affect how you should amend the fine print of the standard ADLS agreement for sale and purchase. The lease states what types of activities the owner is allowed to undertake. It also defines what works the owner must obtain consent from the other cross lease owners for.

Important things that you should check:

    1. Clause 8.6 of the standard form ADLS agreement for sale and purchase (“the agreement”) contemplates unauthorised structures in respect of cross leases. The question should be asked whether or not the vendor has completed any unpermitted works. If the answer is yes, as well as an additional clause that may need to be inserted into the further terms acknowledging that the purchaser is aware of an unauthorised works, for the sake of completeness and clarity clause 8.6 should also be deleted.

    2. The vendor warranty at clause 6.1 of the agreement should also be discussed with the vendor. You should find out if they have received any notice from one of their cross lease neighbours or if they have signed a consent in respect of any works one of their neighbours wishes to undertake. This binds future purchasers so needs to be disclosed at the outset.

Smith and Partners offer a title report service.  For a small fee which can be passed on to the vendor, Smith and Partners will search the title and any interests and report to you as to the implications for your client vendor.


To have a skilled property lawyer search and review a property title contact, please contact Smith and Partners on 09 836 0939 and one of our friendly team will be happy to assist.

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