One area of conveyancing practice which represents a significant risk to purchasers in Australia is boundary defects/encroachments. Losses arising from encroachments and resulting boundary discrepancies fall outside of the state ‘guarantee” of title provided by the Torrens System. This means that whilst your client’s title may enjoy the benefits of ‘indefeasibility’ this protection does not extend to cover discrepancies between the physical and legal boundaries of the property.
There is often a perception by purchasers that the physical boundaries, such as fences and walls, represent the legal boundaries of the property. However, as legal practitioners and licensed conveyancers know, this is not necessarily the case.
It is generally considered prudent conveyancing practice for legal practitioners and licensed conveyancers to advise clients to obtain an ‘identification’ or ‘check’ survey of the property prior to purchase. This aspect of ‘due diligence’ is important as a survey report will identify any discrepancy between the legal and physical boundaries. However, in many jurisdictions in Australia, the overwhelming majority of clients do not obtain a survey report and very few of Australia’s financial institutions require a survey to be obtained as a condition of a loan approval.
Accordingly, many purchasers proceed to settlement without knowing whether the property has existing boundary defects. Boundary defects are problematic because, in circumstances where the boundaries are incorrect, a purchaser may not be legally entitled to all of the improvements which the purchaser paid for as part of the sale. Structures such as garages, sheds, carports and even the main dwelling may, in fact, be located on the neighbour’s land (partly or in full). The neighbour may discover this and demand the structures be removed. Alternatively, the purchaser may discover that fences and other improvements encroach upon their land and demand those structures be removed by the neighbour.
Where a boundary/encroachment issue is discovered after settlement, the purchaser may be faced with the prospect of demolishing structures which formed part of the purchase price or otherwise may be faced with the prospect of complicated and costly legal disputes with the neighbours.
Stewart Title’s Residential Purchaser & Existing Owner Policy provides cover for “Actual Loss” and “Authorised Expenses” as a result of encroachments, boundary discrepancies or other boundary-related title defects which would have been disclosed in a survey report at the time of purchase*.
In the event that an encroachment or other boundary discrepancy is discovered after settlement, such loss and expenses may include:
*The above cover is not available for properties where the land area exceeds 50 acres.
This type of cover is only available through a title insurance policy. A title insurance adds value to your client in circumstances where your client does not obtain a boundary survey at the time of purchase.
The benefit for the conveyancing practitioner is that in the event of a loss incurred by the buyer as a result of unknown survey or boundary defects, the buyer can make a claim on the title insurance policy on a “no-fault” basis.
Should you require any further information, we encourage you to visit the Stewart Title website: www.stewartau.com
Stewart Title also has comprehensive Consumer Guides available which provide commentary and other important information about the coverage and exclusions contained in Stewart Title's Residential Purchaser Policy, including commentary and information about making a claim.
To view, download or print a copy of the Consumer Guides, please click on the following:
By Tony Waldron - Stewart Title Limited
Please note that this information is provided solely for general information purposes only and does not relate to your personal circumstances. It is not intended to be a complete description of all the terms, conditions, exclusions applicable to the title insurance product and does not constitute legal advice. You should contact the title insurer directly for specific advice in relation to the title insurance product and for a copy of a sample policy.
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