When purchasing property in New South Wales, you acquire a “Title” to the land. Limited Title is given to land on which the boundaries have not been examined and verified by Land Registry Services.
We often come across this in older suburbs with properties created under Old System Title, which was based on chain of ownership. The imprecise nature of surveying and measurement during the Old System meant that the boundaries of some Old System Title properties were not accurately recorded. When New South Wales properties were converted to Torrens Title, the properties whose boundaries had not been properly surveyed were designated as limited.
If you plan on purchasing a Limited Title property, there are a few risks that need to be navigated.
Risks
The biggest concern with purchasing a Limited Title property is that the boundaries are not accurately defined by a registered plan. This can create several issues.
First, without defined boundaries, you cannot be sure that the land dimensions will be exactly as expected. Once you have purchased the property, it will also be difficult for you to dispute encroachments if a neighbour attempts to claim part of your land. If you know where the land boundaries are located, you can more easily dispute such a claim.
Second, banks may be reluctant to lend for a Limited Title property or they may require an abstract of title or survey report. Some lenders will refuse to lend for Limited Title properties or lend at reduced loan to valuation ratios. This is because various third parties may make a claim to all or part of the land, if the boundaries are not clearly defined. If the land is vulnerable to claims by third parties, banks cannot ensure the saleability of the land in the event that you default on your mortgage.
Third, you are unable to subdivide or conduct development work on your land until its boundaries are defined. This means you need to prepare and lodge a Plan of Delimitation.
Fourth, you are vulnerable to an adverse possession (“squatters’ rights”) claim which may result in you losing ownership of the land. Though rare and complex, adverse possession claims do occur, specifically when the person making the claim has occupied the land for 12 years or more without any action being taken by the true owner. This means you may be purchasing a property on land which has been claimed by another person.
Not only do these complications make it riskier for a purchase, they also make your property more of a risk for potential future buyers if your purchase is successful and you later decide to sell.
How Burgess Thomson can help
At Burgess Thomson we have a wealth of experience assisting clients looking to purchase Limited Title properties. There are a number of actions we recommend our clients take to minimise the risks incurred in purchasing a Limited Title property.
Pre-purchase Survey Plan
Burgess Thomson recommends that clients looking to purchase a limited title property obtain a survey plan prior to purchase. A registered surveyor will be able to survey the bearings, distances and area of the property and ensure that there are no encroachments by neighbours. A survey plan will also inform you of the exact dimensions and boundaries of the property, meaning you are better informed about what exactly it is you are purchasing.
Plan of Delimitation
We also recommend that clients prepare and lodge a Plan of Delimitation with a surveyor. Some banks will require delimitation before they lend money for a purchase and if you plan on developing or subdividing the land, this step is often essential. A Plan of Delimitation includes a registered surveyor conducting an accurate survey of the land and comparing original deeds’ boundaries to existing occupations. This process encompasses both research into the historical titles of the land, and field work by a registered surveyor.
Once the plan is finalised, it is lodged with Land Registry Services. After the lodgement process is complete, the limitation is removed from the title.
By lodging a Plan of Delimitation, you will be allowed to subdivide or develop your new property and have an easier time disputing encroachment. You will also make the property more attractive for a prospective purchaser if you decide to sell in the future.
Title Insurance
Finally, we always recommend that clients purchase title insurance when buying a Limited Title property. Title insurance protects you from unknown potential risks to property ownership which may threaten your right to occupy and use your land. These risks include claims made by third parties arguing that they have an interest in the land, unknown zoning issues, unapproved building works not disclosed to you prior to settlement and fraud.
Please contact our office if you wish to discuss your Limited Title purchase with one of our experienced solicitors and obtain further information.
