1. What are Easements?
An easement on land either gives another party certain rights over land, or gives the registered proprietor rights over someone else’s land. This right is set out on the Certificate of Title to the land (with one exception).
The most common easements on Titles are Rights of Way, Party Wall Rights and Easements for Drainage or Sewerage purposes. These easements can restrict what owners are allowed to do on certain parts of the property, for example the owner cannot build or lay a slab over drainage or sewerage easements. Permission must be sought and granted before any building work is done.
A Right of Way allows access over the land for various purposes. In a large Community Scheme there will be free and unrestricted rights of way over stairwells, pathways, corridors and lifts. A right of way may also allow a neighbor to come onto land in order to access parts of their own building.
Party Wall Rights occur where there is a shared wall, for example maisonettes and rows of townhouses. The wall is integral to both properties and so both parties have rights to it.
An easement which is not shown on the Certificate of Title is the Statutory Easement to SA Power Networks. All land with an electricity supply from the grid is subject to one of these easements and electricity may be delivered by poles and wires or underground. If the supply is underground, always check where the easement is located for safety’s sake.
It is important to know if there are any easements on the land before a contract is signed, and who may be entitled to access the easement for maintenance work if required. The location and dimensions of an easement are usually shown on the plan which is deposited at the Lands Titles Office. The plan can be ordered if it hasn’t been provided by the vendor. Your conveyancer should inform you of any easements on the property and what this may mean for you.
2. What is a Strata and Community Title Property?
Strata and Community Titled properties are common in South Australia. There are many things to be considered before purchasing one of these properties. There are a number of documents which should be provided by the vendor to inform a purchaser about the property they are considering buying.
Articles or ByLaws are the rules of the corporation. Owners and tenants must abide by the rules, the purpose of which is to ensure quiet enjoyment for all those who occupy the properties in the scheme. Some of the rules include how common property may be used, whether washing may be hung on balconies to dry and the number and size of pets allowed to be kept. The ByLaws may also state that quarterly levies must be paid for upkeep and administration of common property and buildings.
Minutes of Meetings should be provided by the vendor. Smaller self-managed schemes may not hold meetings at all, but many are administered by professional managers who will chair the meetings, collect the levies and arrange for any maintenance to be done. The minutes may also note if there is any major maintenance to be undertaken. If there is a special levy to be raised in the future to pay for it then all owners must contribute. It makes no difference if the property has been owned for ten weeks or ten years. If there is a levy to be raised a purchaser may choose to cool off if the amount is very large.
Insurance certificates of currency should be provided by the vendor. Check the expiry date to make sure the insurance is current. Insurance is required for common property and possibly for buildings as well. In smaller self-managed schemes insurance can sometimes be overlooked but it is an absolute requirement in order to settle.
Your conveyancer can assist you by reading through the Community or Strata Scheme documents and explaining what they mean. It is also a good idea to have your conveyancer read these BEFORE you sign the contract or in the Cooling Off period. Don’t get caught out, it will be too late when you already own the property.
3. Why do I have to put an Encumbrance on my Property?
Encumbrances are generally placed on a property of Title when purchasing sub divided and newly developed land and are usually prepared by the developers of the land. They contain covenants and rules that the new owner are bound by. The most common clauses are related to the type of building materials that are to be used when building a house. Other clauses may restrict what you can have stored in your front yard such as caravans and boats and how many vehicles as well and whether or not you are allowed to have a floodlight at the front of the property.
The idea of these encumbrances are to make the overall development be uniform so that the value of the property is preserved which makes them attractive to future purchasers. However there is a cost to the purchaser when an encumbrance is required and this is often around $500.00 in total including registration fees. Three also may an encumbrance on an existing property that you are purchasing and these are what is called a lift and replace encumbrance. This means that the vendor has to arrange for the existing encumbrance to be removed and you as the purchaser will be required to have a new one put on.
Encumbrances will all vary and need to be read thoroughly. The real estate agent may give you an explanation but it is always best to have your conveyancer explain in details what it will mean to you.
4. What Special Conditions should I Use?
Special Conditions are written in the contract generally to protect you as the purchaser. The most common special condition is finance. Regardless of whether you have a pre-approval the finance clause should be used in the contract. It will allow for a date that your finance is to be approved by, the interest rate that you have requested with the lender and also how much you wish to borrow. In the event that your finance is declined then you will need to provide a letter from your bank stating this and then this letter will be provided to the vendor to prove that you are unable to complete the transaction. The vendor of course has rights under this clause and it will usually state that you have made your best endeavours to get the finance. If they believe otherwise they may insist that you try another lender. This only means that you should go to a regular bank that meets your criteria. You don’t have to find finance with a company that charges exorbitant interest rates.
Other special conditions can be getting a building and pest inspections done and also works to be done by the vendor such as replacing broken windows or other items that may have come to light during an inspection of the property.
It is always best to get advice as to how these special conditions are drafted so not only do they protect you but that that you are also aware of your obligations prior to settlement.
5. What is a Caveat?
The term caveat derives from the Latin term ‘beware’, essentially it is a warning or caution. A caveat can be placed on a Certificate of Title to protect a person’s unregistered interest in that land. A mortgage agreement or a spouse’s interest in land are examples of this. A caveat can prevent any further dealings with the property until that unregistered interest is dealt with.
It is a common misunderstanding that a person/party can lodge a caveat over the property of a person who is in debt to them to secure the repayment of that debt. The Lands Titles Office will examine a caveat before it is registered on a Title to ensure the reason for the lodgement is valid (a caveatable interest), however the merit of a caveat is a matter for the parties involved.
The consequences of lodging a caveat that has no merit is that the person who lodged it (the caveator) will be liable to pay compensation to a party who suffers any type of loss due to the caveat unnecessarily been put in place. The legal costs are quite high if there are objections from both parties about the merit of the caveat. To remove the caveat without an agreement between the parties can require either an application to the Registrar General or an Order of the Supreme Court. In both instances, the caveator will be obliged to commence Court proceedings or defend proceedings to prove their caveatable interest. The risk of these Court proceedings is that if you are unsuccessful in proving a caveatable interest the costs will be claimed from you.
It is not always easy to determine whether you have an interest in a property by reason of a debt or agreement. It is important to seek competent legal advice in any case where you are considering lodging a caveat against someone’s property. If you think you have a legal interest and want to protect that interest, McKay Business Services can advise you and arrange for the preparation and registration of a caveat on your behalf.