What is encumbrance on a property in Queensland?

Table of Content

Revealing encumbrances on a property is a crucial aspect of the conveyancing process. According to the provisions within the standard Contract for Houses and Residential Land as defined by the Real Estate Institute of Queensland (REIQ), a purchaser retains the right to terminate a contract until the settlement if there are undisclosed encumbrances. It’s worth noting that encumbrances might not always be evident in a title search and may require thorough investigation to become apparent..

What is an Encumbrance on a Property in QLD?

An encumbrance is a legal burden, interest, claim, or restriction affecting land, usually in favour of another person, authority, or parcel of land. Common examples include mortgages and easements. Encumbrances are important in Queensland conveyancing because they may affect:
- development,
- resale value,
- building rights,
- settlement,
- financing,
- transferability
- conveyancing process.
They may be registered or unregistered encumbrances, financial and non-financial encumbrances, and can arise under legislation, court orders, or written agreements, whether or not recorded on the title.

Generally, there are two types of encumbrances:
1. Registered encumbrances include encumbrances registered on the title.
2. Unregistered encumbrances are those that are not registered on the title but nevertheless create a benefit and a burden.
3. Financial encumbrances (for example, selling a house with a mortgage) secure a financial burden in favour of the third party ( e.g. Lender).
Some (but not all) examples of encumbrances on property are:
1. Mortgage — lender registers a security interest over the property until the loan is repaid.
2. Easement — another party gains legal rights to use part of the land.
3. Sewer easement — utility providers gain rights to maintain sewer pipes on the land.
4. Drainage easement — authorities reserve land access for stormwater infrastructure.
5. Restrictive covenant — title conditions limit what the owner can build or do.
6. Lease — a tenant gains legal occupancy rights for a fixed term.
7. Residential tenancy — renters gain statutory rights affecting vacant possession.
8. Zoning restriction — planning laws limit permitted land uses.
9. Unpaid council rates — overdue council charges can be registered against the land.
10. Caveat — a person lodges a legal notice claiming an interest in the property.
11. Utility easement — service companies obtain legal access for infrastructure maintenance.
12. Shared driveway rights — multiple owners gain legal use of a common driveway.
13. Building height restriction — planning controls cap allowable building heights.
14. Heritage restriction — heritage laws prevent major alterations or demolition.
15. Strata levy debt — owners corporation debts may affect the title or sale.
16. Body corporate debt — unpaid strata fees may become recoverable from the property owner.
17. Restriction on subdivision — legal conditions prevent future subdivision.
18. Positive covenant — owners must actively maintain or perform certain obligations.
19. Flood overlay — flood-prone classifications restrict building and insurance options.
20. Bushfire overlay — fire-risk controls impose special building requirements.
21. Right of way — neighbouring owners obtain access rights through the property.
22. Power line easement — electricity providers restrict land use near power lines.
23. Water pipeline easement — water authorities reserve rights over underground pipelines.
24. Restriction on further building — covenants limit additional structures or extensions.
25. Restriction on use — title conditions prohibit specified land uses or activities.
26. Commercial lease — business tenants obtain enforceable possession rights over premises.
27. Shared wall agreement — adjoining owners share obligations over boundary structures.
28. Party wall rights — neighbouring properties gain legal rights regarding shared walls.
29. Encroachment issue — structures illegally cross property boundaries.
30. Court order on title — a legal dispute results in restrictions registered on the land.
31. Family law order — divorce proceedings impose restrictions or ownership claims.
32. Tax lien — government authorities claim the property for unpaid taxes.
33. Judgment lien — a court judgment creates a charge over the property owner’s assets.
34. Contaminated land notice — contamination issues create legal cleanup obligations.
35. Environmental protection order — regulators restrict activities to protect the environment.
36. Planning agreement — local authorities require compliance with development conditions.
37. Section 173 agreement — council agreements impose ongoing obligations on future owners.
38. Caveatable interest — another party claims a legal interest capable of registration.
39. Unregistered lease — undocumented tenancy rights may still bind future owners.
40. Owners corporation charge — unpaid shared property expenses burden the title.
41. Fencing dispute notice — unresolved boundary disputes may affect title transfers.
42. Access rights — another person legally enters or crosses the land.
43. Easement for parking — third parties secure legal parking rights on the land.
44. Access licence — contractual rights allow another party to enter the property.
45. Occupancy agreement — another person obtains contractual rights to live in or use the property.
46. Conservation covenant — environmental protections limit land clearing or development.
47. Native vegetation restriction — regulations restrict clearing native plants or bushland.
48. Tree preservation order — local laws prohibit removal of protected trees.
49. Coastal protection restriction — coastal regulations limit development near shorelines.
50. Agricultural covenant — farming-use obligations restrict alternative development.
What are Unregistered Encumbrances?

In the most recent iteration of the QLD REIQ, sellers are instructed to communicate with buyers regarding ‘any title encumbrances that will continue after the settlement.’ Failure to disclose unregistered encumbrances gives the buyer the right to terminate the contract before settlement, even if the contract is otherwise unconditional. The buyer can also seek damages, including costs.

Some agents and solicitors are incorporating comprehensive ‘Catch All’ clauses into contracts (e.g. Sunset clause or, ‘Solicitor’s Approval’ clause), aiming to recognize the existence of unregistered title encumbrances in QLD without detailed specifications. A common provision in these contracts typically states that it covers ‘all statutory easements, encumbrances, or rights related to water, sewerage, drainage, or other utilities.‘ Nevertheless, this may not meet the requirements for thorough disclosure and could expose the seller to potential legal consequences.

To ensure comprehensive disclosure of any unregistered encumbrances, a thorough investigation should be made. If any such services are identified through this search, the seller must affirmatively respond to the question ‘Title Encumbrances: Is the property subject to any Encumbrances?’ A description of the encumbrance, such as ‘Brisbane City Council stormwater drain running parallel to the rear boundary of the property from right to left,’ should be provided.

Furthermore, a copy of the plan obtained from the search, highlighting the position of the encumbrance on the property, should be attached to the back of the contract. All parties involved should then sign this annexure as part of the contract.

When conveyancing in Brisbane, our company’s searches includes:
1. Verification of Identity,
2. GST,
3. Land Tax – Clearance Search,
4. Property searches (Department of Transport and Main Roads),
5. Body Corporate Information,
  Certificate & Insurance Certificate (Estimate only),
6. Common Property Title,
7. Community Title Scheme Search Statement,
8. Title Search,
9. Plan Image.
The price of these searches is generally comparable across all Queensland solicitors. To find out the current cost of such searches, you can fill out a residential conveyancing quote, and you’ll receive a PDF with the current rates listed on the second page.

What is the difference between registered and unregistered encumbrances?

Registered encumbrances are officially recorded on the property title through the land registry, while unregistered encumbrances are not recorded on the title but may still affect the property through legislation, court orders, contracts, or equitable rights.

Some examples of registered encumbrances:
- Electricity infrastructure easement — a utility provider registers rights on title to access and maintain underground power infrastructure on the property.
- Proposed road resumption notice — a government authority records a future acquisition or road widening interest against the land title.
- Telecommunications tower easement — a telecom company registers rights to install and service communications infrastructure on the land.
- Mortgage — a lender registers a security interest over the property until the loan is repaid.
Some examples of unregistered encumbrances:
- Unpaid water infrastructure charges — outstanding utility debts may affect settlement even if not shown on title.
- Unregistered lease agreement — a tenant may have enforceable occupancy rights despite the lease not being registered on title.
- Informal access arrangement — a neighbour may claim longstanding access rights over part of the property without formal registration.
- Statutory infrastructure rights — government or utility authorities may hold legal access powers created by legislation without registration on title.
What is the difference between financial and non-financial encumbrances in QLD?

In Queensland, financial charges are encumbrances connected to money owed or secured against a property, while non-financial charges are restrictions or rights affecting how the land can be used or accessed. Financial charges usually involve debts or repayment obligations, whereas non-financial charges typically relate to legal rights, planning controls, or land-use limitations.

Financial encumbrances (money-based claims or security interests):
- Mortgage — bank secures a loan against the property
- Second mortgage — additional lender secures further debt on the same property
- Unpaid council rates — local government debt attached to the land
- Strata levies arrears — unpaid body corporate fees owed by the owner
- Tax debt charge — ATO or state tax authority claim over the property
- Construction lien — builder claims unpaid building work
- Judgment debt — court order enforcing payment against the property owner
- Vendor’s lien — seller retains interest until purchase price is fully paid
Non-financial encumbrances (rights, restrictions, or limitations):
- Easement — utility or neighbour has legal access over part of the land
- Right of way — someone else has legal access through the property
- Heritage listing — restrictions on demolition or alteration of buildings
- Zoning restriction — limits what the land can be used for
- Caveat — notice of a claimed interest preventing certain dealings
- Covenant — contractual restriction on how the land may be used or developed
- Environmental protection order — limits activity due to environmental concerns
- Access licence — permission for another party to enter or use the land periodically
What are Restrictive Covenants Encumbrances?

A restrictive covenant imposes certain limitations on the utilization of a piece of land, which can include constraints on building materials or the size of the architectural plan. These covenants are frequently encountered in new developments, where developers employ them to maintain a consistent appearance across properties.

It’s crucial to distinguish between the two primary types of covenants: negative and positive:
- Negative covenants pertain to actions that are prohibited, whereas positive covenants prescribe actions that must be undertaken. For instance, a negative real estate covenant might prohibit the raising of chickens on your property.
- Positive covenant could mandate regular lawn maintenance.
We previously wrote a more detailed article about how GM Law convening solicitors typically find covenants and easements on a property in QLD.

What are Statutory Encumbrances in QLD?

The presence of assets owned by any statutory authority on the land is a statutory encumbrance, which must be disclosed to the buyer as a title encumbrance. For example, local governments possess a statutory right to access private land for the maintenance of drainage and sewerage pipes.

It’s important to note that statutory encumbrances of property are not always registered on the property title. They pertain to the essential infrastructure required for the upkeep of a property. These encumbrances may encompass overhead power lines, as well as drainage and sewerage pipes both above and below the land. Various entities, such as local councils, Energex, and Urban Utilities, are granted statutory rights to establish and maintain these services. Some of these services may be so longstanding that they are not recorded on the property title. Regardless of their registration status, removing these structures from your property is typically not permissible.

Must a Seller Disclose Encumbrances?

Yes, as the seller, it is imperative to ensure that the property title you deliver to the buyer at the time of settlement is free from any concealed encumbrances. This requirement is specified in REIQ dictates that ‘The Property is to be transferred without any undisclosed Encumbrances, except for the Title Encumbrances and Tenancies.‘

Therefore, a seller’s responsibility is to meticulously enumerate all encumbrances that will endure post-settlement in the reference schedule of the contract, under the section titled ‘Matters Affecting Property.’ This includes any encumbrances that may not currently be recorded on the property’s title.

It’s worth noting that you are not obliged to disclose a mortgage that will be discharged upon settlement. However, it’s critical to emphasize that this list must be thorough and explicit; merely referring to a search that will be conducted before settlement or the title search is insufficient.

How Can You Protect Yourself from Undisclosed Encumbrances?

The existence of undisclosed encumbrances can impact both parties involved in a conveyance. If you’re the seller, you might be wondering how to safeguard yourself against a buyer’s potential termination due to undisclosed encumbrances. On the other hand, if you’re the buyer, you may be inquisitive about how to ascertain if there are any concealed encumbrances on a particular lot. Like many issues in conveyancing, these concerns can be mitigated through diligent searches and the inclusion of carefully crafted special conditions. For a comprehensive examination of the importance of due diligence, please refer to some of our previous articles:
- What Happens if a Settlement is Delayed During Conveyance?
- What Can Go Wrong When Transferring a Property
In essence, both parties should undertake thorough property searches to gain a full understanding of what is being bought or sold. Both parties can benefit from utilizing services like Dial Before You Dig, a national referral service offering information about the location of underground infrastructure. This can reveal the location of any services on the land subject to a statutory easement. Other searches for encumbrances encompass Town Planning searches and checks with the Personal Property Securities Register. For sellers, full disclosure is advisable to reduce the risk of a buyer terminating the contract. For buyers, conducting these searches can uncover any encumbrances that the seller may not have disclosed.

So, if you need legal assistance with solving any encumbrances, you can write via chat, describe your problem using the Contact Us form, or call us on 1300 185 636 and one of our assistants on the other side of the line will let you know how we can help you. Even if this is beyond our legal permission, it is a quick and free step you can take right now to get closer to solving your issue.