Title Defects | Unauthorised building works, encroachments, and boundary issues | The Complete NSW Buyer’s Guide

Buying property in New South Wales can be an exciting venture, but it comes with its own set of challenges, especially when dealing with unauthorised building works, encroachments, and boundary issues. These title defects can significantly impact the value and usability of a property, and will often become your problem if they are not identified as part of your upfront due diligence when buying a property.

In this article, we will guide you through understanding some common ‘title defects’, how they can be identified, and how to manage any associated risks.

Understanding title defects

Some common examples of titles defects include the following:

Unauthorised building works

Unauthorised building works refer to any construction or renovation wprks done at a property without the necessary approvals from local council.

These can include extensions, sheds, decks or even internal modifications that do not comply with building codes or zoning laws. Such works can lead to legal complications, fines, or even orders from the local council for demolition.

Encroachments

Encroachments occur when a structure, such as a fence or building, extends beyond the legal boundaries of a property onto neighbouring land. These encroachments can sometimes have existed for many years without any issues but suddenly lead to disputes between neighbours requiring legal intervention to resolve.

For example, John and Peter are neighbours and good friends. Oneday, John decides to build a carport on his property. However, he realises that during the building process, the roof of his carport needs to extend slighly over the boundary line into Peter’s property. John speaks to Peter about this and Peter doesn’t have any concerns – so, John goes ahead and finalises the carport. Five years later, Peter sells his home and Stephanie buys it. A few months later, Stephanie has a survey report completed and identifies that John’s carport extends onto her property. Because Peter and John didn’t document their agreement, John is left with no option but to rectify the encroachment onto Stephanie’s property.

Boundary issues

Boundary issues arise when there is uncertainty or disagreement about the exact lines that define a property. This can be due to outdated or inaccurate surveys, leading to potential conflicts with adjacent property owners.

How can buyers identify title defects during the sales process

As part of a buyer’s due diligence, they should do the following (before a contract becomes unconditional) to identify potential title defects:

Conducting a property survey

Survey reports can identify encroachments or boundary issues.

A buyer can engage a professional surveyor to inspect the property and provide an accurate assessment of the property boundaries.

Reviewing council records

Councils maintain records of all approved building plans and any enforcement actions taken against properties.

A buyer can contact the local council to access records of building approvals or notices that relate to the property. This can reveal unauthorised works.

Search the governement title search

All properties in New South Wales have a certificate of title, which identifies (amongst other things) any restrictions, covenants, encumbrances that are registered against a particular property.

A title search can uncover any registered encumbrances, easements, or covenants that may affect the property. This search is essential to understand any legal restrictions or obligations tied to the property.

Ask the seller if they are aware of any potential title defects

In New South Wales, a buyer is entitled to raise requisitions or ask questions of the seller about their property.

Whilst the seller is not obliged to respond to such questions (or they may simply provide a vague response), it can often be a useful exercise to raise questions about potential title defects with the seller during the due diligence process.

Managing risks where a buyer identifies

Legal advice

Engaging a lawyer with expertise in property law is vital. They can provide advice on the implications of any identified issues and the potential costs involved in rectifying them.

Negotiating with the seller

If issues are identified, you may negotiate with the seller to have them resolved before purchase or to adjust the purchase price accordingly. This can include obtaining necessary approvals for unauthorised works or rectifying encroachments.

Insurance

Consider obtaining title insurance, which can protect against certain risks associated with title defects, including unauthorised building works and boundary disputes. This insurance can provide peace of mind and financial protection.

To read more in title insurance, please see our articile: Title Insurance Explained | The Complete Buyer’s Guide.

Rectification

For unauthorised building works, you may need to apply for retrospective approval from the local council. This process can be complex and may require modifications to bring the works up to code.

Things to think about

Purchasing property in NSW requires careful consideration of potential title defects such as unauthorised building works, encroachments, and boundary disputes. By conducting thorough due diligence, seeking professional advice, and considering insurance options, you can mitigate these risks and ensure a smooth property transaction. Always remember that addressing these issues early can save significant time, money, and stress in the long run.

By understanding and managing these potential pitfalls, you can confidently navigate the property market in NSW and make informed decisions that protect your investment.

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