The term encumbrance refers to instruments or agreements burdening or affecting a property. Encumbrances can restrict how owners deal with their land. They can be registered or unregistered; most registered encumbrances appear on title’s register search statement (an electronic search of the title). An example of an encumbrance is a mortgage. A mortgage is a registered instrument on the title securing the lender’s (usually a bank) right to have a loan repaid and to take further action against the property if not not paid when due. Other encumbrances include (non-exhaustive list):
- Section 173 agreements
- Other agreements registrable under legislation
- Reservations in the Crown Grant
- Warrants of seizure and sale
Under the general conditions of the standard-form contract of sale in Victoria, a purchaser buys property subject to any encumbrances disclosed by the vendor in the vendor’s statement (the Section 32) except for a mortgage, caveat, lease or reservation in any Crown Grant (if applicable). It is important that all purchasers carefully check the contract and vendor’s statement for any encumbrances that will negatively impact their intended use of the property.
Book a contract review with us today.