Don’t Be Fooled By The Unobservable Costs That Lay In Wait For Unwary Buyers Of Land In New South Wales!
When you are purchasing land in NSW there could possibly be more costs involved then you think you’ll be spending. For instance, the land you purchase may require you to do some sort of action to maintain part of that land and therefore burden you with extra costs. Another issue could be the fact that you may want to build several properties on the land you have purchased, but you are prevented from doing so, due to a water pipe having been established beneath the land, which diminishes the worth of your land that you initially wanted to attain.
As you consider and decide to settle on purchasing land, it is best that you are aware of any obligations you may have in regards to the land. Accordingly, we will consider the type of land plans that you could possibly be purchasing and outline the potential obligations that may arise with your purchase.
Land title in NSW is based on a plan, which defines the boundaries of a parcel of land at the date upon which it is registered. When new land parcels are created or subdivided a plan must be prepared, lodged and registered with the Land & Property Information (LPI). This plan creates the legal identity of the land.
The main plan types are Deposited plans, Strata plans and Community plans.
- Deposited plans generally depict a subdivision of a parcel of land.
- Strata plans depict the subdivision of a parcel of land to allow multiple occupancy and separate ownership of individual units.
- Community plans depict the development of any type of planned communities where the use of some land is shared.
So what happens when a parcel of land is then subdivided?
Once a property is subdivided, the blocks of land are then known as different property ‘lots’. These lots can be of different shapes and sizes (as shown below), and may have certain obligations imposed on them.
So what exactly are these obligations and what may they include?
The first obligation that may be imposed is an Easement or Right of Way. An Easement or Right of Way is an agreement made between parties to give a person, a company, a council or other authority, the right to use all (or part) of another person’s land for a particular purpose.
An easement can also restrict what a person can do on their land.
For instance, an easement may be created for the use of a pathway, supply of electricity, or for road access, and therefore the owner of the land must share that part of their land with those who are authorised to do so.
Positive & Restrictive Covenants
A positive or a restrictive covenant may also be imposed on the owner of the land.
A positive covenant, like an easement, is an agreement that will require the owner of the land to carry out certain actions. This can include requiring any one or more of the persons who own the land from time to time, to repair or maintain the land. For instance, a positive covenant may require the owner of the land to maintain a fence to a certain standard.
A restrictive covenant, on the other hand, is an agreement that will require the owner of land to either take a specific action or abstain from taking a specific action. Like positive covenants, restrictive covenants can include requirements such as adequate maintenance of the property and/or may limit what they can do with their property. For instance, a restrictive covenant may govern certain homeowners with a limitation in relation to the colour of their house.
These covenants can be simple or complex, and failing to abide by them can lead to imposition of penalties against the owner of the property.
A new purchaser of land will generally be required to enter into a deed of covenant with the person entitled to the benefit or burden of the covenant. The deed will confirm that the new owner will perform the covenant and a sale cannot be registered unless and until such a deed is given. Owners of the land generally cannot sell the land unless a deed confirming that the new owners will perform the convenient is obtained.
Accordingly, before you decide to purchase land, you should consider whether any of these obligations apply to the land as you may be faced with extra costs to carry them out, in a similar way to the purchaser in the example above.
Law Clerk – Property Department