Sellers of Real Estate should be aware of the need to disclose to the buyer any encumbrances that affect the property. This disclosure must be provided prior to the buyer/s signing the contract. Some encumbrances are easy to identify as they are listed on the Title i.e. registered easement or covenants. There are some however which are not listed on the title and are generally referred to as “Unregistered Title Encumbrances”. All unregistered title encumbrances need to be disclosed to the buyer.
The most common example of an Unregistered Title Encumbrance, is an easement granted by statute to certain suppliers of services such as water, electricity, stormwater, internet & telecommunication cabling equipment.
In the latest edition of the QLD REIQ Contract for Houses and Residential Land, the seller is warned to disclose to the buyer under the heading “Matters Affecting Property”:
“all Title Encumbrances which will remain after settlement (for example easements on your title and statutory easements for sewerage and drainage which may not appear on a title search)”.
Failure to disclose unregistered title encumbrances may entitle the buyer to terminate the contract at any time up to settlement, even if the contract is otherwise unconditional. The buyer may also recover damages,including costs.
Some real estate agents are adding general ‘Catch All’ clauses to contracts in an attempt to “disclose” the existence of these unregistered title encumbrances, without specifically identifying them. An example of a standard clause commonly seen written into contracts is: “all statutory easements or encumbrances or rights for water, sewerage, drainage or other utilities”. It is doubtful that this is sufficient disclosure and leaves the seller open to potential unwanted ramifications.
To complete full disclosure of any Unregistered Title Encumbrances, as well as a title search, a “Dial Before You Dig” search should be conducted. This should identify the location of any & all services on and to the land which would be the subject of a statutory easement.
If any such services are identified through such a search, the seller must tick “yes” to the question “Title Encumbrances: Is the property sold subject to any Encumbrances”.
A description of the encumbrance must then be provided e.g. Brisbane City Council stormwater drain that runs Parallel to the rear boundary of the property from right to left.
Additionally, a copy of the plan from the search with the position of the encumbrance on the property highlighted, should be attached to the back of the contract. All parties should then sign that annexure as forming part of the contract.
To avoid unwanted outcomes, please contact DBL Solicitors to obtain advice and have all necessary searches conducted to enable adequate disclosure to be completed.