Encumbrances on a property’s title can also make it difficult to get a mortgage, because a bank may be hesitant about lending you money to buy a property subject to an encumbrance that could affect its future value. For example, you may discover that the front 5m of your lovely new property is actually within the road reserve and you simply have an easement on that part of the land, giving you the ability to use it but without giving you any rights to actually own it. All good and well of course, until the local authority decides to widen its road, at which point it will take back ownership of its land, and your front garden will suddenly be 5m shorter.
An easement is a common type of encumbrance and may cover things such as allowing gas, water or sewerage to flow through the property – these types of encumbrances are often granted to local authorities or utility companies. Other common easements include things like drainage (giving someone the right to drain water over someone else’s land) or ‘rights of way’.
Owing to the fact that an encumbrance can have binding effects on subsequent owners of land, local authorities often use encumbrances as a convenient way to ensure landowners comply with certain consent conditions, such as, for example, restricting any further sub-division of a piece of land.
A covenant is another type of encumbrance that places some type of restriction on the use of the land, such as restrictions on the type or quality of buildings constructed or on the size of the floor plan. This sort of covenant is common in new developments, as a way to ensure that properties maintain a certain standard or level of uniformity. Other examples are height restrictions that may protect a view or limit the height of a tree. While land covenants can be restrictive, they may also mean that the property to which the covenant applies will be more valuable, particularly for future resale.
So, while an encumbrance has the potential to lessen the value of a property, in some cases the specific encumbrance can have more positive long-term implications. However, irrespective of whether the effect of an encumbrance is positive or negative, it is critical when purchasing a property that you ensure you do your due diligence on the title of the property in question.