A conveyancing transaction involves many steps, and if you’re buying property, conducting a title search forms an integral part of the due diligence process.
Title searches provide pertinent information about a property and can save you from significant financial and legal headaches down the track.
Why Do I Need a Title Search When Buying Property?
Primarily, a title search confirms the legal ownership of a property and therefore, the person or entity permitted to deal with it. As an essential source document, the title search provides the information necessary for preparing the contract for sale of land.
Additionally, title searches reveal various dealings, registered interests, and encumbrances over a property which can affect its transferability, value, and use.
Title searches are essential for purchasers to make informed decisions about their investment and to flag potential issues that could derail a conveyancing transaction.
What Does a Title Search Reveal?
- Ownership: Verifying the vendor’s legal right to sell a property is fundamental to a conveyancing transaction. A title search confirms that the person or entity noted in the contract has the legal right to deal with and transfer the property to you. A title search will also reveal if the property is owned by multiple parties, so all necessary consents can be obtained for the sale.
- Registered plans: Deposited plans or strata plans form part of searching a property’s title. They help identify and clarify the legal description of the property and show boundaries and dimensions, as well as the location of any easements on the property. If a plan of the land is not shown on a title search, your conveyancer should obtain a copy of the registered plan at the time of ordering the title search.
- Mortgages and charges: Outstanding debts secured against a property, such as a mortgage given as security for a loan, must be discharged before completing a conveyancing transaction to ensure that a purchaser obtains ‘clear title’ to the property.
- Easements: An easement grants a legal right for someone to use a specific part of someone else’s property. Examples include utilities easements (electricity lines and water pipes) or easements for access (shared driveways).
Typically, easements ‘run with the land’ and will remain on the title after the property is transferred from a seller to a buyer. Easements can affect the use and value of a property and require thorough investigation by the buyer as part of the due diligence process.
- Covenants: A covenant is a legally binding rule or restriction on how land can be used or developed, for example, limits on building height, specific architectural styles, or even restrictions on keeping certain animals.
- Caveats: A formal notice lodged on the title by someone claiming an interest in the property, known as a caveat, prevents any further dealings (like a sale) without that party’s consent or a court order.
- Leases: Existing long-term tenancy agreements can mean that a purchaser acquires the property subject to current tenants. The lease terms, tenant history, including any disputes, should be carefully assessed before proceeding with a purchase.
When Are Title Searches Conducted?
The ultimate objective of a title search is to clarify ownership, flag interests, and ensure that ‘clear title’ can be transferred to a purchaser, free from significant defects or hidden surprises. Generally, a title search will be available with the draft contract for sale and/or is one of the first steps undertaken after an offer is accepted, giving the purchaser an early snapshot of the property’s legal health.
Banks and financial institutions will want to investigate the title before formally approving a loan for a property and will require evidence that the title will be transferred clear of any prior mortgages, etc. on settlement.
As there is scope for additional interests to be recorded on a title from when a search is first conducted to the completion of a conveyancing matter, it is prudent to conduct a ‘final search’ moments before your property transaction is completed. In addition to protecting your interests, this will be a prerequisite for your lender releasing loan funds on settlement.
How Do I Obtain a Title Search?
In Australia, title information is typically managed and stored by the relevant government land titles office (or equivalent body) in each state and territory. These offices are responsible for maintaining and recording transactions and the various ‘interests’ that impact a parcel of land, i.e., sales, transfers, mortgages, easements, etc.
Title searches are usually ordered online through the land titles office website using the street address or other details used to identify the property such as the lot and deposited plan number or title reference.
Conclusion
When buying property, a comprehensive title search is essential to protect what is likely to be one of your largest financial outlays. In addition to confirming that the party or entity described in the contract is legally entitled to sell the property, a title search provides essential information that can impact your investment and help you make informed decisions.
An experienced conveyancer or solicitor will conduct a thorough title search to protect your interests and provide the necessary expertise to guide you through your property journey.
This is general information only, and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please call (08) 8232 8446 or email [email protected].