Statutory Encumbrances

If you’re selling a property in Queensland, you’ve probably heard the term “statutory encumbrance” from your lawyer, read it on the new Form 2 Seller Disclosure Statement or REIQ Contract for your sale or purchase.

Statutory encumbrances matter because failing to disclose one could give a Buyer the right to terminate the contract or claim compensation from the Seller.

What is an encumbrance?

Encumbrances are things that impact a property’s use, value or ownership.

Common examples include:

• Easements that allow others to access or use part of the property;
• Covenants or restrictions on how the property can be used;
• Government rights or interests affecting the land;
• Leases;
• Mortgages or other charges over the property;
• Heritage listings;
• Encroachments onto neighbouring land;
• Contamination notices;
• Outstanding notices requiring work to be completed;
• Ongoing obligations under development approvals; and
• Body corporate matters for units and townhouses.

Under Queensland’s seller disclosure laws, sellers must disclose many of these matters before a contract is signed and that is usually done in the Sellers Disclosure Form 2.

What is a statutory encumbrance?

Statutory encumbrances are not often registered on the property’s title, unlike other encumbrances.

Instead, they obtain their rights through legislation that allows government authorities or utility providers to install, access and maintain infrastructure or assets on the property.

Examples include:

• Sewer and stormwater pipes;
• Underground water mains from entities such as Unitywater or Urban Utilities;
• Electricity infrastructure from entities such as Ergon Energy;
• Gas pipelines;
• Telecommunications infrastructure from entities such as Telstra, Optus and NBN Co QLD.

These services may run above, below or through a property, even though they don’t appear on the title.

Authorities such as local councils and utility providers may have the legal right to enter a property to inspect, repair or maintain this infrastructure.

Why disclosing statutory encumbrances matter

Just because a statutory encumbrance isn’t registered on the title does not mean a Seller is not obligated to notify a Buyer of its existence.

For example, if a sewer line runs underneath a property and this isn’t disclosed to the Buyer, the Buyer may have rights to seek compensation or terminate the Contract.

Statutory encumbrances can also include:

• Unpaid government charges, such as council rates that create a statutory charge over the property; and
• Outstanding notices requiring work to be completed, such as works to make a swimming pool compliant.

Finding statutory encumbrances on a property

Not all statutory encumbrances appear in standard property searches or the Seller Disclosure Form 2.

While council rates notices can sometimes identify sewer or drainage infrastructure, they don’t always provide the complete picture.

One of the best resources available for free online is Before You Dig Australia (BYDA). BYDA provides a referral service that supplies plans showing the location of underground infrastructure, including electricity, water, gas and telecommunications assets.

Obtaining a BYDA search before completing your Seller Disclosure Statement can help identify infrastructure affecting your property and reduce the risk of incomplete disclosure.

Conclusion

Seller disclosure is an important part of every Queensland property transaction and taking the time to identify and disclose statutory encumbrances before signing a contract, or equally being aware of the statutory encumbrances on a property as a Buyer, can help avoid disputes, delays and the risk of contract termination.

If you’re unsure whether something affecting your property needs to be disclosed, obtaining legal advice before listing your property, to get it right the first time, can prevent significant delays, costs and stress.

If you’re buying or selling property, the team at FC Lawyers assist your understanding of your disclosure obligations, and guide you through your conveyancing transaction with confidence. Contact our team today to discuss your conveyancing options.