Encumbrances are interests attached to the land by someone who is not the owner. All encumbrances, whether registered or not, should be disclosed in the Vendor Statement and appear on the title search. The most common encumbrances are:
A covenant is like a promise between land owners, restricting the way they can use and develop it. When you take ownership, you also agree to abide by such restrictions for the benefit of the land. Covenants may be positive in nature that impose an obligation on the land owner, such as garden maintenance. However, most covenants are negative that limit the use of the land, for example a building height restriction. Registered restrictive covenants ‘run with the land’ which means that they pass from one owner to the next. We recommend that you seek legal advice if you wish to have a covenant removed or varied. The main types of covenants fall into the following categories:
- Building covenants, which restrict how the land can be developed
- Covenants that preserve a neighbourhood’s character. For example, a covenant may prevent an owner from erecting a front fence
- Covenants that relate to owner’s corporations
An easement allows someone the right to use land without being the owner of that land. A common example of a positive easement is a right to pass through a neighbour’s land to reach your own. A negative easement would prevent the land owner from doing something on their own land, such as obstructing a neighbour’s view. Like covenants, easements pass on to new land owners if it is sold.
The purpose of a caveat is to serve a warning to the world that a person claims an unregistered interest in the land and the title may not be transferred without the consent of the caveator. It is basically a note on the title to prevent a buyer from taking possession. As an example, a buyer who agrees to purchase land and pay a deposit may wish to lodge a caveat.
A title search will alert the buyer if a mortgage is attached to the property. Typically, the lender prepares discharge of mortgage documentation and the mortgage is discharged at settlement.