DUE DILIGENCE ON TITLES AND THE IMPORTANCE OF REGISTERED DOCUMENTS

Posted by Aidan Tattley on March 31 2021 in News

The importance of doing proper due diligence on a property is hard to understate. Whether it is in the context of acquiring a single residential property, a cross-lease, unit title or a subdividable block of the land, the message is the same. Proper legal due diligence is a must. Equally, if you are already the owner of a property, understanding what benefits you enjoy against adjoining properties or what obligations you are bound by, is essential.

The impact of unknown and/or misunderstood instruments can range from an inconvenience through to rendering the land effectively, useless it is for its intended purpose. While most title issues can be overcome, it generally takes time and money to investigate and resolve these issues. So, the earlier they can be identified, (preferable during a due diligence period, where you can evaluate the options) the better.

Listed below are a few examples of issues that can arise from a title perspective, either at the point of purchasing or when undertaking re-development/renovations:

• Land Covenants which restrict the ability to further subdivide: It is a common term in large subdivisions to restrict the ability to further subdivide. However, where the lot is such a size that practically subdivision is not feasible, this is unlikely to be an issue. Issues arise when these covenants also affect larger lots or ‘super-lots’ which may or may not be capable of further subdivision.
   
• Cross-leases: Many people will be aware of the common issue of unauthorised structures constructed over crosslease titles; however, this is not the only issue that could arise. The wording of the lease (and any co-lessors leases) should be carefully reviewed and reconciled against the property to ensure there are not any unnoticed breaches. These breaches may seem minor in nature but can in fact, can cause difficulty. A good example of this would be a case we have seen recently; a chimney protruding above the roof line, and although it was discrete, matched the colour of the roof and was only visible from limited aspects, the cross-lease expressly prohibited chimneys above the roof line. This led to a situation whereby the neighbour was in a stronger position to negotiate when our client needed consent to the deposit of a new survey plan and ultimately to vary the lease. 
   
• Properties having incorrect or limited access rights when utilising ‘right of ways’: It can be difficult identifying the correct easement areas, particularly with older subdivisions or where there have been multiple subdivisions over time. But this is critical to ensuring you have the appropriate access to your property. It is important to check what the purpose of the right of way is for, as a vehicular right of way does not (by default) grant the right to convey gas and can lead to the need to grant additional rights of way.
   
• Titles being limited as to parcels: Generally, this means that when the title is first issued, there is insufficient survey detail for an ‘ordinary’ title to be issued. This is more common in some areas and can be problematic if looking to purchase the property. In this case, it is important to investigate further (seek advice from a surveyor) to consider whether it is feasible to have the limitation removed and understand the extent of the variance between the area of the limited tile and the ‘actual area’.
   
• Services over the property that do not have the appropriate rights: Such as, power-lines or pipelines running through or over the property

Other common issues could include: Notices, caveats and charging orders registered against the title along with missing documents (such as leases).

These are just few examples which are certainly not exhaustive and only touch on matters relating to the title. Other related matters such as, the planning rules, would also need to be considered.

If you are looking at purchasing a property, or have issues with registered documents, neighbours, rights of ways or any questions about your rights or obligations derived from your title, please get in touch with us. We would be happy to advise on the position, as well as endeavoring to provide pragmatic advice and options to resolve the issues.

Richard Hatch | Partner | Richard.Hatch@shieffangland.co.nz

Aidan Tattley | Solicitor | Aidan.Tattley@shieffangland.co.nz