Sellers – make sure you disclose all easements in the contract!

View All Articles

Sellers need to avoid giving buyers an easy “out” of the sale contract. One of the most common of these is if an encumbrance on the property, such as an easement, is not disclosed to the buyer in the contract.

The seller has an obligation to make the buyer aware of all easements related to the property. This is usually done by disclosure in the contract. Seller’s please note – your obligation to disclose is not dependent on whether the easement is listed on a title search or not. If an easement exists, you should disclose it.

But what actually is an encumbrance or easement? And what happens if it isn’t disclosed?

This article will demystify these issues.

What is an easement?

First up, let’s explain what an easement is.

An easement can best be explained as the right for anyone to use a part of a land in a certain way, regardless of whether that person is the landowner or not.

Easements come up very commonly in situations including;

  1. Services – where drainage, sewerage, electricity, or water infrastructure runs across your property for the benefit of a neighbouring property, or for an Authority like Energex, Unitywater or the local Council. This easement allows the services to run across your land, and allows the Authority to maintain the infrastructure.
  2. Access – where a neighbour’s driveway to the street runs across their neighbour’s land.
  3. Stormwater – in low-lying or sloping properties, it is common for Councils to require that stormwater be able to run over part of a property – the easement is usually in favour of Council, and the owner is not allowed to build on the easement area.

An easement is a very good example of an “encumbrance”. An encumbrance is something that affects the use of the land.. Other encumbrances include registered leases or mortgages.

What is the difference between an easement burdening the land and an easement benefiting the land?

An easement either ‘burdens’ or ‘benefits’ the land. In either case, the easement should be listed on the property title, though this is not always the case.

An easement ‘burdening the land’ means that the easement area is actually on that particular Lot and is for the benefit of someone else.

An easement ‘benefiting the land’ means that the easement area is located on someone else’s property and your property gets the benefit of that easement.

For example, Here there are two lots. There is an easement area over Lot B. Say the easement was for access.

In this example, the easement would burden Lot B for Lot A’s benefit. The practical implication is that the owner of Lot A can pass over the easement area located on Lot B.

What is an Easement in Gross?

An ‘easement in gross’ is simply an easement which is for the benefit of an entity which is not a neighbouring property owner. Examples of this are the service easements to Energex, Unitywater or the local Council mentioned above. Often these easements were required as a condition of a development approval.

Do all easements have to be registered?

While most easements are registered on title, it does not mean that they always are.

For example, stormwater and sewerage mains passing under or over your property may not be registered but still must be disclosed on the contract.

Another example is power lines over a large rural property. Sometimes those power lines are so old, that there is no easement registered on the title. However, it is still an encumbrance that should be disclosed because it is affecting the use of the land.

Often, Councils will have the infrastructure plans in their records, so owners can find out more information about easements and other encumbrances which may exist over their property.

If you are selling, it is strongly advisable to conduct searches if you are not certain about easements, encumbrances or anything else that may affect the land. It is better to get the information and make proper disclosure, then risk losing your sale.

Buyers usually carry out Council and other searches, and will often discover undisclosed encumbrances for themselves.

Do all easements have to be disclosed if I sell my property?

YES! Every single easement, or encumbrance must be disclosed in the Contract.

If a buyer finds out there is an easement or encumbrance on the property that wasn’t disclosed, they may be able to terminate the contract. Not only that, but the buyer can seek to recover damages for their losses against a seller. This can cost a lot of time, money and heartache that sellers do not want to go through.

The buyer may be able terminate in situations where the easement or encumbrance will interfere with their use or enjoyment of the property.

How do I disclose an easement in the contract?

Standard Contracts for a house and land or unit, have a section where any easements or encumbrances on the property can be listed.

Full details of the easement must be disclosed; whether it is an easement in gross, burdening easement or an easement benefiting the land, registered or unregistered.

FC Lawyers can go over your contracts before you sign them to make sure that you are aware of your obligations as a seller and your rights as a buyer.

You can contact our property law team today to discuss any concerns or queries you may have.

The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.