Easements, encumbrances and caveats: what's lurking on a property title in Australia

A property title in Australia carries layers of legal interests you can't see at the open house: a sewer easement under the back yard, a covenant restricting the type of fence, a caveat lodged by a previous buyer who paid a holding deposit and never settled. Most won't matter. The few that do can cost five figures or kill a deal. The Title Search is the document that exposes them, and reading it before you sign is closer to free than it feels.

Conveyancers and solicitors do this work for a living, but the responsibility for understanding what they hand back sits with the buyer. A title that comes back clean takes two minutes to read. A title with three caveats, an easement in gross to Sydney Water, and a single-storey covenant takes longer, and the questions you ask in that ten minutes are the difference between a smooth settlement and a regret.

Torrens title and the one corner of NSW that isn't

Almost every property in Australia sits under the Torrens system, where the register is the title. Whoever the registry lists as the proprietor owns the land, full stop, and any encumbrance not on the register generally cannot be enforced against a buyer who took the title in good faith. The legal term is indefeasibility. It is the single most important feature of Australian land law for a buyer.

A small number of inner-Sydney and regional NSW properties still sit under Old System title, where ownership is proven by tracing a chain of deeds back at least 30 years. These are rare, the conveyancing is more expensive, and the title insurance question becomes real rather than theoretical. Your conveyancer will flag Old System early; if they don't mention it, you're on Torrens.

What a Title Search actually shows

A Title Search is a one-page extract from the state land registry. It lists, in order:

• The registered proprietor: whose name the land is held in, and the tenancy if there is more than one owner. Joint tenants share equally with a right of survivorship; tenants in common hold defined shares that pass through their estate. The split matters for stamp duty, estate planning, and what happens when one owner dies. The companion piece on tenants in common vs joint tenants covers the trade-offs.
• The lot and plan: the legal description that identifies the parcel. This is the identifier the contract should refer to, not the street address.
• Mortgages: any registered loan secured against the title, by bank name and dealing number. A mortgage on the vendor's side is normal and is discharged at settlement when the existing loan is paid out from sale proceeds.
• Easements: rights that another party holds over a portion of the land, typically a right of way, a drainage line, a sewer main, or an electricity line.
• Restrictive covenants: obligations that limit what an owner can do with the land, generally imposed by a developer when an estate is first subdivided.
• Caveats: notices that someone else claims an interest in the land. A caveat does not create an interest; it warns the registry not to register a dealing without notifying the caveator.
• Statutory charges and notations: council rates, water charges, ATO interests, land tax arrears, heritage overlays, and other government interests recorded against the parcel.

Each line carries a dealing number and a registration date. The dealing number is the key to ordering the underlying document, which is what you read when the one-line description on the title is ambiguous.

Easements: usually fine, occasionally expensive

An easement is a right that runs with the land. Sydney Water's sewer main under your back yard isn't going anywhere because you bought the house, and a neighbour's right of way along the driveway survives a change in ownership on either side. Most easements are invisible day to day, and most buyers never think about them again after the search.

They matter when you build. A sewer easement typically bans permanent structures within a defined zone, often one metre either side of the pipe, and the water authority's build-over policy then becomes the controlling document for any extension, pool, or shed in the affected area. Sydney Water, Yarra Valley Water, Urban Utilities, SA Water and the rest each publish their own rules, and consent is discretionary. An easement in favour of an electricity authority for an overhead line creates similar headaches if the planned extension would bring the new wall within the clearance envelope.

Private easements between neighbours are messier than utility easements. A right of carriageway across the driveway means the neighbour is entitled to use it for the purpose granted, and the owner of the servient tenement cannot block it. Gates, bollards, and locked chains have all been litigated and lost. Read the easement document, not just the line on the title.

Restrictive covenants: the developer's long shadow

Covenants are most common on land that was master-planned and subdivided by a single developer. The original sale contract bound the first buyer to a set of rules, and the rules were registered against the title so they would bind every subsequent owner too. Typical examples include minimum dwelling size, prohibition on dual occupancy, restrictions on building materials, fence styles, garage orientation, and tree retention. A surprising number of Melbourne lots carry single-storey covenants from post-war subdivisions, and they have proved expensive to live with in suburbs where the planning code would otherwise permit a second storey.

Covenants can be removed, but the path is slow. In Victoria, an application to vary or remove a restriction usually goes to the council and may end up at VCAT. In New South Wales, the Supreme Court has jurisdiction under section 89 of the Conveyancing Act. Cost runs from a few thousand dollars for a straightforward unopposed application to tens of thousands when neighbours with benefit of the covenant object, and the outcome is never guaranteed. Title insurance won't cover a covenant disclosed on the search; it covers things the search missed.

Caveats: notice, not interest

A caveat is a notice lodged by someone claiming an interest in the land. Common caveatable interests include an unregistered mortgage, a purchaser under an uncompleted contract, a beneficiary under a trust, and a party with the benefit of an option to purchase. The caveat itself doesn't create the interest; it warns the registry not to register a transfer or new mortgage without notifying the caveator first.

Caveats can derail a settlement. If a previous prospective purchaser lodged a caveat claiming an unsigned holding deposit gave them an interest in the property, the registry will not register the transfer to a new buyer until the caveat is withdrawn, lapsed, or removed by court order. A stranger caveat, lodged by someone with no legitimate caveatable interest, can be challenged via a lapsing notice that gives the caveator 21 days to support the claim in court or watch it disappear. The legal cost of doing this is modest; the time cost is real, and time is what you don't have when settlement is in 10 days.

Mortgages, statutory charges, and what gets cleared at settlement

The vendor's mortgage is the most common encumbrance on a title. It is discharged at settlement as a matter of course: the lender provides a discharge authority, the outgoing mortgage is paid out of sale proceeds, and the new buyer's mortgage (if any) is registered in its place. Modern PEXA electronic settlement coordinates the discharge, transfer, and registration of the new mortgage in a single workspace.

Statutory charges behave differently. Council rates, water and sewer charges, and land tax are apportioned at settlement, with the vendor paying their share to the date of completion and the buyer assuming liability from that point. Unpaid land tax is the one to watch in NSW and Victoria, because in some scenarios the charge survives settlement and the new owner inherits it. The vendor disclosure documents covered in the Section 32 / Form 1 explainer usually include the land tax certificate, but a careful conveyancer will reorder it on the day of settlement.

Which registry to order from

Each state and territory runs its own land registry. You rarely order the search yourself; your conveyancer or solicitor will pull it through their broker account. But knowing where to send a question is useful.

• NSW: NSW Land Registry Services, via authorised information brokers.
• VIC: Landata, run by Land Use Victoria inside the Department of Transport and Planning.
• QLD: Titles Queensland, part of the Department of Resources.
• WA: Landgate, via the Landgate online portal.
• SA: Land Services SA, operating the Lands Titles Office.
• TAS: Land Titles Office Tasmania.
• ACT: Access Canberra, ACT Land Titles Office.
• NT: NT Land Titles, Department of Attorney-General and Justice.

A worked example: the covenant that ate the extension

A buyer pays $850,000 for a single-storey weatherboard on a 580 square metre block in Melbourne's inner north, with a clear plan to build a $120,000 second-storey extension once the kids reach school age. The Section 32 is reviewed by their conveyancer, who flags a 1953 restrictive covenant on the title limiting buildings to a single storey in height.

The buyer has three options.

• Walk away: invoke a cooling-off right if the contract is unconditional, or rely on a finance or solicitor's-approval clause if one was negotiated. The companion piece on cooling-off periods by state covers the time windows.
• Negotiate: ask the vendor for a price reduction reflecting the loss of optionality. A ballpark calculation: if the second-storey extension would have added an estimated $200,000 in market value once complete, against a $120,000 build cost, the covenant strips roughly $80,000 of future value the buyer expected to capture. A buyer who knew about the covenant in advance would pay closer to $770,000 for the same block.
• Accept and apply to remove: lodge an application at VCAT under section 84 of the Property Law Act to vary or discharge the covenant. Legal, planning, and notification costs typically run $5,000 to $15,000, the process takes 6 to 12 months, and objections from neighbours with the benefit of the covenant can defeat the application. Net expected value is positive only if the buyer is reasonably confident there are no organised objectors.

Run the buy-side numbers through the buying cost calculator with the negotiated price, not the headline price, so the stamp duty and acquisition costs reflect what the property is actually worth to a buyer who plans to build up.

A second worked example: the caveat that delayed settlement

A buyer in Sydney's inner west exchanges contracts on a $1.02m terrace, with a $765,000 owner-occupier loan approved at 6.10% and settlement scheduled in 42 days. Two weeks before settlement, a caveat appears on the title, lodged by a person claiming an unsigned holding deposit at an earlier inspection gave them an equitable interest. The vendor's solicitor serves a 21-day lapsing notice. The caveator does nothing and the caveat falls off the register, but settlement has slipped six weeks past the contract date.

Penalty interest on most standard contracts of sale runs at a published rate, often around 10% per annum on the balance owing. On a $765,000 balance, that is roughly $209 per day. Across 42 days of delay, the buyer is exposed to about $8,778 in penalty interest, partly offset if the contract provides for vendor default in which case the buyer recovers rather than pays. The exact allocation depends on whether the delay is the vendor's fault, the buyer's, or neither, and the contract drafting and state law together decide who wears it.

Arithmetic check: $765,000 multiplied by 10% gives $76,500 per year, divided by 365 days gives $209.59 per day, multiplied by 42 days gives $8,802.74. Close enough to $8,800 to plan around. A buyer who sees a stranger caveat appear can ask their solicitor to lodge the lapsing notice on day one rather than day three; saving 48 hours saves about $420.

Reading the search line by line

The mechanical process is short. Go through the search from top to bottom and ask one question at every line: does this affect what I plan to do with the property?

• Proprietor: matches the vendor named in the contract. If not, why not.
• Mortgage: will be discharged at settlement. No further action.
• Easement: order the underlying document via the dealing number, identify the burdened area, overlay it on the site plan, and check it does not sit under the proposed extension, pool, garage, or driveway.
• Covenant: order the document, read the restrictions, and check them against your intended use and future plans.
• Caveat: ask the vendor's solicitor for the basis of the claim and the plan for removal before settlement. If there is no plan, do not proceed to unconditional.
• Statutory charges: confirm they will be apportioned, paid out, or noted on the settlement adjustment sheet.

When to walk, when to negotiate, when to accept

A clean title is the default and most contracts get there. When something does appear, the decision tree is reasonably simple.

• Walk when an encumbrance directly defeats your reason for buying. A second-storey covenant on a block you bought to extend upwards. A right of way through the only space the pool would fit. A caveat that cannot be removed in time and the vendor will not extend settlement.
• Negotiatewhen the encumbrance reduces optionality but doesn't defeat the purchase. Use the disclosure to ask for a price reduction proportional to the lost future value. A single-storey covenant on a block where you only ever planned a ground-floor renovation reduces optionality by less than it does for a buyer planning a second storey.
• Accept when the encumbrance is the ordinary background of Australian land ownership: a utility easement well clear of any future building envelope, a developer covenant that codifies what you were going to do anyway, a discharged mortgage that settles in the normal course.

Where this fits in the buying process

The Title Search is one of the documents your conveyancer or solicitor reviews as part of the contract review. The guide on conveyancer vs solicitor covers who does this work and what to pay for it. The building and pest inspection covers the physical layer the title doesn't. The subject-to clauses explainer covers the contract mechanics you use to walk away if the search turns up something material.

On Burbfinder, suburb pages surface the hazard overlays and planning zones that frequently underpin the encumbrances on individual titles in the area. The title is property-specific; the overlay is suburb-wide. Reading both together is how a careful buyer builds a picture of what they are actually committing to.