Property Title Search NSW. Failing to verify the property title can result in purchasing a property with existing encumbrances or disputes, potentially leading to legal complications and financial losses. It is vital to conduct thorough checks to ensure a smooth transaction.

What Should I Check in the Property Title Search NSW?

When considering purchasing property, the title is one of the most critical documents you must scrutinize. The property title not only confirms ownership but also reveals potential encumbrances, restrictions, and other vital details that could impact your purchase. Below, we outline key elements to check in a property title, complete with practical examples and considerations for prospective buyers.

1. Ownership Details

The first and most crucial aspect to verify is the ownership of the property. The title should clearly list the current legal owner(s) of the property. This is essential to ensure that the seller has the legal right to sell the property.

Example: Imagine you are buying a property, but a title search reveals that the person selling it is not the registered owner. This could indicate a fraudulent sale or a complicated legal situation that might take years to resolve. Ensuring the seller is the registered owner can prevent such costly disputes.

2. Easements

Easements are rights granted to others to use a portion of the property for a specific purpose, such as utility maintenance or access to a neighboring property. Easements can significantly restrict your ability to use or develop the property.

Example: You purchase a lot intending to build a swimming pool, only to discover later that an easement runs through the middle of your backyard, allowing the local water authority to access underground pipes. This easement may prevent you from building in the desired location, resulting in additional costs or altering your plans entirely.

3. Mortgages and Other Financial Encumbrances

Any outstanding mortgages or financial claims against the property will be listed on the title. The seller must discharge these obligations before the property can be transferred to you.

Caveat: If the seller has not fully paid off the mortgage, the lender holds the Certificate of Title. This means that if the mortgage is not discharged at the time of settlement, you could face delays or even legal challenges in obtaining clear title to the property.

4. Covenants

Covenants are legally binding stipulations written into the title that govern how you can use the property. These may include restrictions on the type of structures you can build, the materials you can use, or the way you must maintain the property.

Example: If a covenant restricts you from using certain exterior paint colors or building materials, this could limit your renovation plans. Breaching these covenants can result in legal action or fines, so it’s essential to understand any covenants before purchasing.

5. Caveats

A caveat acts as a warning that another party has an interest in the property. This can prevent the sale of the property until the issue is resolved. Caveats are usually lodged by individuals or entities that have a legal interest, such as a contractor who has not been paid for work done on the property.

Caution: Buying a property with a caveat on the title can be risky. It indicates unresolved issues that could lead to legal disputes or delays in transferring ownership. Always ensure that caveats are removed or adequately addressed before proceeding with the purchase.

6. Leases

If the property is leased to tenants, the title should reflect this. Long-term leases, especially those over three years, are typically registered on the title. As a new owner, you would be legally bound by the terms of any existing lease agreements.

Example: Suppose you buy a commercial property with a registered lease. The tenants have legal rights to occupy the premises for the lease term, and you cannot evict them without cause. Understanding the lease terms and tenant rights is crucial before making your purchase.

7. Types of Titles

Understanding the type of title is crucial as it determines your ownership rights. Common titles include:

• Torrens Title: The most common title in Australia, providing full ownership of the land and buildings.
• Strata Title: Common for apartments and townhouses, where you own your unit but share ownership of common areas with other owners.
• Company Title: Less common, this involves owning shares in a company that owns the property rather than owning the property outright.
• Leasehold: You lease the property from the landowner for a specific period rather than owning it outright.

Caveat: Some titles, like leasehold or company titles, can complicate financing options, as not all lenders are willing to approve mortgages for these types of properties. Always consult with a mortgage broker or financial advisor to understand the implications of the title type.

8. Encumbrances

Encumbrances refer to any legal obligations or restrictions on the property, such as liens or encroachments. These can affect the property's value or your ability to sell it in the future.

Example: An encumbrance might be an unpaid bill for property improvements, where a lien has been placed on the property. This must be resolved before you can gain clear ownership.

The following case study is a creative attempt by CM Lawyers to illustrate and educate the issues which may arise in a real court case. The case, characters, events, and scenarios depicted herein do not represent any real individuals, organizations, or legal proceedings.

NSW Court Case: Smith v. Thompson [2019] NSWSC 654

In the case of Smith v. Thompson [2019] NSWSC 654, the buyers, the Smiths, purchased a property without realizing it had an unresolved encumbrance. This oversight led to a legal battle that cost them both time and money.

What Happened

The Smiths were eager to buy a new home and trusted that their conveyancer had conducted all necessary checks. However, the conveyancer missed an existing encumbrance on the property, which restricted the use of part of the land. This discovery was made only after the purchase was completed, leading to significant distress for the Smiths.

Behavior of the Participants

The Smiths acted in good faith, relying on their conveyancer for due diligence. The seller, Thompson, did not disclose the encumbrance, assuming it was the buyer's responsibility to uncover such issues. The conveyancer, unfortunately, overlooked this crucial detail, failing to protect the Smiths' interests.

The Legal Process

Upon discovering the encumbrance, the Smiths sought legal recourse to either annul the purchase or obtain compensation. The court examined the contract and the due diligence process undertaken by the conveyancer. The judge ruled that the conveyancer had been negligent in their duty, and the Smiths were awarded damages to cover the costs of resolving the encumbrance issue.

Financial Consequences

The financial consequences were substantial. The Smiths incurred $50,000 in legal fees and were awarded $75,000 in damages to rectify the encumbrance issue. This included the cost of removing the encumbrance and any associated legal expenses.

Conclusion

The court concluded that thorough due diligence on the property title is essential. The conveyancer’s negligence had significant financial repercussions for the Smiths, reinforcing the need for meticulous checks before finalizing any property purchase.

Lessons Learned

1. Thorough Checks: Always ensure that a detailed check of the property title is conducted before purchase.

2. Engage Professionals: Hire competent conveyancers or solicitors to manage the due diligence process.

3. Verify Disclosures: Ensure that all disclosures from the seller are accurate and complete.

4. Understand Encumbrances: Know the implications of any encumbrances on the property and how they can affect your use of the land.

References

Smith v. Thompson [2019] NSWSC 654

NSW Government on Property Titles

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