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 should not 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 Strata Scheme there will be free and unrestricted rights of way over stairwells, pathways, corridors and lifts. A right of way may also allow a neighbour 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. There are rules relating to firewalls when building homes that have party wall rights so these should be clarified before purchasing a property with this type of easement.
One 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.
Easements can be varied or extinguished in certain circumstances. The process can be arduous and complicated and all parties with interest in the easement (including Mortgagees on the Title) need to agree to the variation or extinguishment
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.
WHAT IS A STRATA OR 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 (Strata) or ByLaws (Community) 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 (as part of the Form 1) for the two years prior to the property going on the market. Some smaller self-managed Corporations may not hold meetings at all, but others may be administered by professional managers who will chair the meetings, collect the levies and arrange for any maintenance to be done. Managers charge an annual fee for the service. 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. Balance Sheets, Profit and Loss Statements and Budgets may also be provided by the vendor as part of the Form 1.
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 Corporation 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. This will ensure that you are fully informed – it will be too late when you already own the property.
WHY IS THERE AN ENCUMBRANCE ON MY PROPERTY?
Encumbrances are generally registered on a Certificate of Title for newly sub-divided/newly developed land. They are usually prepared by the developers of the land and contain restrictive covenants and rules that the new owner of the land will be bound by. A new owner will usually be prevented from re-subdividing the land, for example, and there are many other common clauses which form part of the Encumbrance. The land may be subject to rules about fencing, building materials, time-frames for commencing and completing construction, lighting, satellite dishes, recycled water, what you can store in your front yard such as caravans and boats and where you are allowed to park cars.
The purpose of an Encumbrance is to make the overall development be uniform and consistent, thus preserving the value of the property. There is a cost to the purchaser when an encumbrance is required and this is often around $500.00 in total including registration fees which is payable to the developer’s conveyancer or solicitor. If there is an Encumbrance on an existing dwelling that you wish to purchase it may be a Lift and Replace Encumbrance. This means that the vendor has to arrange for the existing encumbrance to be discharged and you as the purchaser will be required to have a new one registered in your name. The vendor pays for the discharge and the purchaser pays for the new Encumbrance. If the Encumbrance contains a Sunset Date the land could be transferred without lifting and replacing the Encumbrance.
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.
WHICH SPECIAL CONDITIONS SHOULD BE INCLUDED IN MY CONTRACT?
Special Conditions are written into the contract generally to protect you as the purchaser. The most common special condition is Finance. Even if you have a pre-approval from your lender 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 how much you wish to borrow. Always talk to your mortgage broker or banker prior to signing to ensure that you have enough time to meet your obligations under the Finance Special Condition, especially in these times of COVID-19. In the event that your finance is declined then you will need to provide a letter from your lender stating this and this letter will be provided to the vendor to prove that you are unable to satisfy the finance special condition. You must use your best endeavours to obtain finance and if the vendor believes that you have not done so they may insist that you apply for finance with another lender. This only means that you should go to a regular bank that meets your criteria, you are not obliged to accept finance from a company that charges exorbitant interest rates, for example.
Other special conditions which can be included in the contract are: building and pest inspections, works to be done by the vendor prior to settlement, practical completion of a new dwelling and a settlement date being dependant on certain events such as subdivision of the land.
It is always best to get advice as to how these special conditions are drafted so that they correctly reflect the intention of the condition. Special Conditions are there to give you rights and inform you of your obligations under the contract.
If you make an offer on the property which is subject to certain conditions always read the contract before signing to make sure the conditions have been included. It is not easy to add conditions after the fact and may not be possible.
WHAT IS A CAVEAT?
The term caveat derives from the Latin term ‘beware’ essentially giving a warning or caution to anyone searching a Certificate of Title. 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. A Caveat will hold priority over any subsequent dealings lodged on the Title.
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. 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.
State Governments and Departments can lodge caveats for certain reasons, including non-payment of Rates and Taxes and when Land is to be compulsorily acquired.
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.
See also: Seven Questions about Caveats?
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers