What is an Encumbrance on a property title? A Guide for WA Buyers

When you're buying a property in Perth, there's a good chance your settlement agent will send you a copy of the Certificate of Title and mention that the property has one or more "encumbrances".  For some buyers, that word can sound concerning - "Is something wrong with the property?".  The answer is: Usually, no.  In fact, many properties in Western Australia have encumbrances recorded on the title, and most are completely normal. The important thing isn't whether an encumbrance exists, but understanding what it means and whether it affects how you plan to use the property.

Whether you're buying your first home in Joondalup, upgrading in Hillarys or purchasing an investment property around Padbury, here's what you need to know about encumbrances.

What is an encumbrance?

An encumbrance is a legal interest, restriction or notification recorded against a property's Certificate of Title.  Encumbrances can be used for a variety of purposes, including:

• To give someone else certain rights over the land

• To restrict how the land can be used

• To notify future owners that certain legislation applies.

An encumbrance doesn't necessarily reduce a property's value or indicate a problem. It just means there's something recorded on the title that buyers should understand before signing a contract.

When do you find out about encumbrances?

There are a few different ways buyers become aware of encumbrances.  These are often included in the Contract of Sale, but they can be quite wordy, and many buyers do not take the time to read and understand them.  

If you engage your settlement agent before signing your Offer and Acceptance, they'll usually review the Certificate of Title as part of your pre-contract review and explain any encumbrances affecting the property.  This is one of the many reasons we encourage buyers to seek advice before signing. It's much easier to understand how an encumbrance might affect your plans before you're legally committed.

Once your offer has been accepted, your conveyancer will typically also provide you with a document identifying the title, which summarises the Certificate of Title and explains the registered interests (encumbrances) affecting the property.

The most common encumbrances you'll see in WA

Mortgage

One of the most common encumbrances is a mortgage.  If you're buying a property with an existing mortgage (which is very common), don't panic - the seller's bank simply has a registered interest in the property until their loan is repaid.  As part of settlement, the seller’s conveyancer works with the seller's lender to discharge the mortgage, allowing the title to transfer to you free of that mortgage.

In most cases, the old mortgage disappears at settlement and, if you're borrowing money for the purchase, your new lender's mortgage is registered instead.

Easement

An easement gives another person or authority certain rights over part of the land, even though you own it.  Common examples in Perth include:

• Sewer or drainage easements

• Western Power easements

• Shared driveways or rights of carriageway

Easements are common inclusions on subdivided blocks.  For example, a sewer easement may prevent you from building a swimming pool or large extension over that section of your backyard.  Similarly, a shared driveway easement may give your neighbour legal access across part of your property.

Many easements have very little practical impact on day-to-day living, but it's important to understand them before making renovation plans.

Restrictive covenant

A restrictive covenant limits how land can be used.  These are often imposed by developers to maintain a consistent standard across an estate.  You’ll commonly see restrictive covenants mentioned when you buy land in new estates, but they remain after the initial development and can continue to affect the property for years to come.

Some of the things a restrictive covenant may include are:

• Minimum dwelling sizes

• Approved building materials

• Single dwelling only and restrictions on subdivision

• Setback requirements

Some restrictive covenants expire after a period of time, while others remain indefinitely.  If you are buying a property with a restrictive covenant, your conveyancer will review the covenant document and, if it has expired, arrange for it to be removed from the title as part of the settlement process.

If you're buying with plans to build, renovate or subdivide, it's important to understand whether any restrictive covenants apply.

It’s also worth mentioning that often the same Restrictive Covenant is shown as both a ‘benefit’ and a ‘burden’.  Whilst you are ‘burdened’ with complying with the requirements of the covenant, you also enjoy the benefits of everyone else in the vicinity having to comply.

Caveat

A caveat is often one of the most misunderstood encumbrances.  Put simply, a caveat is a legal notice claiming an interest in the property.  It doesn't necessarily mean there's a dispute.  Examples of reasons people may lodge caveats on a property include:

• Family law proceedings

• Beneficial ownership claims

• Purchaser's interests

• Court orders

• Homeowners Association requirements - see Iluka Homeowners Association for an example of where this may apply.

In some circumstances, caveats are routinely lodged to protect someone's legal interest until settlement or another event occurs.  Your conveyancer will investigate any caveat appearing on title and explain whether it affects your purchase.

Notification

A notification alerts future owners that certain matters affect the property.  Unlike easements or covenants, notifications don't necessarily create rights over the land; instead, they simply provide important information.  Common notifications around the Perth metro area include:

• Aircraft noise

• Bushfire-prone areas

• Acid sulphate soils

• Mosquito breeding areas

For example, a property close to Perth Airport may have a notification advising buyers that aircraft noise should be expected.

These notifications help buyers make informed decisions before purchasing.

Memorial

A memorial records that specific legislation affects the land.  Rather than creating rights for another person, it identifies statutory obligations or restrictions applying to the property.

Examples of when a memorial may be used include:

• For unpaid Land Tax

• Contaminated land notices

• Proceeds of crime

There are currently over 30 different types of memorials which can be registered.  Refer to Landgate’s website for a full list of the current types.

Unlike many other encumbrances, memorials often arise because legislation applies to the property itself rather than because of an agreement between landowners. Because memorials can have significant implications, it's important to understand exactly which legislation they refer to.

Understanding common encumbrances

Encumbrance	What it means	What it could mean for you as a buyer	Can it usually be removed
Mortgage	Bank has a registered interest	Usually removed at settlement	Yes
Easement	Someone has rights over part of the land	May affect where you can build	Rarely
Restrictive Covenant	Limits how land can be used	May restrict renovations or subdivision	Sometimes
Caveat	Someone claims a legal interest	Depends on why it was lodged	Sometimes
Notification	Advises of matters affecting the property	May influence your future use or enjoyment	Rarely
Memorial	Records legislation affecting the land	Depends on the legislation involved	Depends

Should an encumbrance stop you buying a property?

Usually not.  Many Perth properties have one or more encumbrances recorded on the title.  A sewer easement, for example, is extremely common, and likewise, it's perfectly normal for a seller's mortgage to appear on title before settlement.

The important question is whether it affects your intended use of the property.

If you're planning to install a swimming pool, subdivide, build a granny flat or substantially renovate, certain easements or restrictive covenants could become much more important.  That's why understanding the title before signing is so valuable.

Why a pre-contract review matters

One of the biggest advantages of having your settlement agent review the contract before you sign is that they can explain these issues in plain English.  Rather than simply seeing legal terminology on a title search, you'll understand:

• What the encumbrance actually means

• Whether it's common

• Whether it affects your intended use of the property

• Whether you need any further investigations before proceeding

That knowledge allows you to make an informed decision before you're legally committed to purchasing the property.

FAQ: Encumbrances on property titles

What is an encumbrance on a property title?

An encumbrance is a legal interest, restriction or notification recorded on the Certificate of Title that may affect the property or how it can be used.

Are encumbrances bad?

Not at all. Many are completely normal, including mortgages and sewer easements.

What is the difference between an easement and a restrictive covenant?

An easement gives someone certain rights over the land, while a restrictive covenant limits how the owner can use the land.

Can an encumbrance be removed?

Some can, while others remain permanent or expire only under certain circumstances. It depends on the type of encumbrance.

Will my conveyancer explain the title to me?

Yes. Your conveyancer should review the Certificate of Title with you, explain any encumbrances and answer any questions before settlement (and ideally before you sign the contract).

Understanding your title before you sign

Property titles often contain more information than buyers expect, but that doesn't mean there's cause for concern. Most encumbrances are simply part of owning property in Western Australia. The key is understanding what they mean and whether they'll affect your future plans.  At North Shore Conveyancing, we help buyers across Perth and WA understand their contracts and property titles before they commit. If you're preparing to make an offer and would like a complimentary pre-contract review, contact Katelyn for clear, practical advice before you sign.