Disclosure is Critical!

When that pivotal moment arrives and it is time to sign the contract, as a seller you need to be aware of the failure to disclose a statutory or unregistered encumbrance on the contract, can lead to lawful termination of the contract by the buyer.

Many contracts for the sale of land in Queensland place upon the seller of the land an onus to disclose to the buyer not just any registered encumbrances such as easements and leases, but also any “statutory” or unregistered encumbrances that affect the land.

The existence of a statutory encumbrance may not appear on a title search of the property; but may provide the buyer with a valid means of termination if the seller fails to disclose the encumbrance prior to execution of the contract.

What are Statutory Encumbrances?

A statutory encumbrance does not often appear on the title to property. Despite a statutory encumbrance not being “registered” on the title, its mere existence may carry with it certain statutory rights, restrictions, or obligations upon the owner.  Not all statutory restrictions or obligations bind the owner in the same way and a key issue for sellers is determining what statutory encumbrances impact the title in a material way and which ones merely place restrictions on the use and enjoyment of the land.

The latter encumbrance may only need be disclosed in certain circumstances, such as through provisions in section 408 of the Environmental Protection Act 1994 (Qld) where the property is on the contaminated land register.

An Obligation to Disclose

Although the disclosure obligations upon a seller are limited in Queensland, when compared to other states, the seller is still obligated to provide sufficient particulars that effect title to the property to allow the buyer to affect the transfer. The seller’s obligation to disclose these statutory encumbrances and other defects in title arises from both common law and the terms of the contract itself.

Therefore, where title to the property is affected by an encumbrance (registered, statutory or otherwise) the seller must provide a sufficient description of any encumbrance or interest that will persist on the title after registration.

What are some examples of statutory encumbrances?

Identifying whether a statutory encumbrance materially affects the title depends on whether the right, restriction or obligation that arises because of the statute, create an encumbrance that attaches to the land and binds successive owners without consent.

While an unregistered encumbrance may not be as easily identified as a registered encumbrance – an unregistered encumbrance that is capable of registration should still be disclosed to any potential buyer; examples may include short leases, equitable mortgages, and any land access agreements.

A statutory encumbrance may also arise from a statutory right conferred upon a third party (such as the local council). For example, the statutory right granted under section 144(1) of the Local Government Act 2009 (Qld) for a local government to enter private property to access drainage or sewerage pipes creates a statutory right of entry that the court has found analogous to an easement.

Here at Wright Place, we can assist you, along with the help of your solicitor or conveyancer to identify any statutory encumbrances, so they can be fully disclosed, protecting the validity of your contract once fully executed.

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