Smith & Stanton Snippet
No 7 - Easements - Encumbrance or not?
Standard Contract Terms:
Clause 7.2 of the Contract sets out that the Property is sold free of all encumbrances except for those noted in the Title Encumbrances section of the Reference Schedule. This Clause does not refer to tenancies and mortgages which are dealt with elsewhere in the Contract. The Clause only relates to encumbrances which affect the property after settlement. A good example of an encumbrance that needs to be disclosed in the Contract is an easement.
Benefit and Burden Easements:
Benefit and burden easements are dealt with in Snippet No. 6.
Question:
Do easements that benefit the property need to be noted in the Contract as an
encumbrance?
Answer:
Yes. Courts have determined that all easements, whether they are burdening or benefiting the property, need to be disclosed in the Contract. The reason for this is that the Courts have held that failure to disclose an easement to the buyer is a misdescription and is therefore unfair and inequitable to the buyer.
If the seller fails to disclose a registered easement in the contract, costly litigation may result. Depending on the nature of the easement, the buyer may have a right to rescind the contract or claim compensation from the seller.
Alert:
The Title search for the Property being sold will reveal whether there are any registered encumbrances, such as burdening or benefiting easements, that need to be disclosed in the Contract.
The failure by an agent to identify and include an easement as an encumbrance in the Contract may amount to negligence on the agent’s part.
Produced by:
- Anita De Domenico – Conveyancing Manager
- Naomi Wright – Conveyancing Support
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