Background to Australian land law

This reading provides you with some knowledge about property law in Australia. You need an understanding of these laws and their history to grasp the basic principles on which the sale or transfer of land title rests. 1. Definition of land 2. Land title 3. Encumbrances 4. Ownership

What is land?
In property law, the definition of land is broader than it is in everyday use. It includes not only the surface, but what is underneath it (the soil), above it (the airspace) and upon it (all things growing on or fixed to the ground, including buildings and crops). Land has an established position, defined by reference to geographical features and documented in maps and plans.

Different Land titles in Australia

Terra nullius and native title
When penal colonies were first set up in Australia, British statute and common law applied and the British Crown owned all Australian lands. This was based on the concept of terra nullius (an empty land), in other words the idea that Australia was unoccupied before the British arrived. This view lasted until 1992 when the High Court recognised the existence of native title under the provisions of common law. The Commonwealth Native Title Act (1993) and The Native Title Amendment Act (1998) recognise and define native title. The Crown retains the power to extinguish native title, but under the Australian Constitution, if it does so, it is liable to pay compensation to the holders of Australian native title.

Old system title and Torrens title

Until the mid-nineteenth century, the ownership of land was recorded using a very cumbersome system, referred to as old system or common law title. Records called conveyances enacted the transfer of ownership of land. Old system title required the owner of the land to prove a chain of ownership dating back 30 years. It is called good root to title.

The Real Property Act 1862 introduced the revolutionary Torrens system of registering ownership and land dealings, which provides a state controlled and state guaranteed title to land. The basic principle of the Torrens system is that interest in (or title to) land or property depends not only on the registration of that interest, but also on a certificate that acknowledges title. A Torrens certificate of title provides details including the area, a legal description, a scale plan of the land and a history of dealings from the time the land was registered. The owner of the land is called the registered proprietor. Registered proprietors of land are entitled to deal with the land and have those dealings registered on the certificate of title. These dealings include the granting of a mortgage, lease or easement. Copies of certificates of title are kept in the Lands and Properties Information Office and title searches have been automated.

Qualified title
The system of qualified title was introduced to reduce the number of lots still under old system title and provide those proprietors the opportunity to convert them to the more practical Torrens system. Land under a Qualified title is land that is transitioning from old system title to Torrens Title. Qualified title means someone else may have a previous interest in the land. The person buying the land needs to be cautious, because under these circumstances there is no guarantee protecting the title of the new owner. The qualification lapses after 12 years, although a registered proprietor may apply after six years to have it removed. The land then becomes an ordinary Torrens parcel.

Company title
As the name suggests, this is a form of multiple ownership. It allows company ownership of a parcel of land and buildings and provides individual shareholders of that company with the right to occupy a particular part of the company-owned building, such as a unit or office. The board of directors controls the building. There are a number of disadvantages to company title: it can be difficult to get a loan for property under this title and shares are not readily transferable. Often there are strict controls on use of the property, for example leasing to particular tenants. Not many properties fall into this category.

Strata title
Strata title is another system of multiple titles, which allows more flexibility and gives title to real property by providing for a subdivision of a Torrens title lot. This system of title is controlled by the enactment and operation of The Strata Schemes (Management) Act 1996. The main features of strata title are: The strata plan: this is the basis of strata title and is a type of floor plan that shows the position of each lot on each floor of a building. Lots and common areas: Each lot is defined by the cubic space contained in the

horizontal and vertical boundaries, which are generally defined by the inner surface of the walls, the upper surface of the floor and the under surface of the ceiling. The area beyond these surfaces is the common property. This is the land and improvements not contained in a particular strata lot. Unit entitlements: The strata plan must also provide a schedule of unit entitlements. The allocation of unit entitlement should reflect the relative values of the lots at the time of registration. Unit entitlement also determines the voting rights attached to each lot and the proportion of operating costs of the strata scheme payable. A certificate of title: this is issued for the common property, as well as one for each of the lots shown on the strata plan. Strata roll: this records details of the proprietors and others who have an interest in the lot, such as mortgagees and lessees. Owners need to be recorded on the strata roll to be able to vote at meetings. A Strata managing agent may manage the affairs of a particular strata scheme.

Anyone planning to buy a strata unit needs a Section 109 certificate. This gives information on the status of the current proprietors levies, insurances, and any registered by-laws. It also specifies the location of the books and records of the strata scheme. Anyone interested in buying a strata property should investigate these records prior to purchase.

Advantages of strata title

Strata title has the following advantages: Each owner holds a certificate of title. Strata title is recognised as real property. This means that it is acceptable as security for financing a loan. Owners are free to use their individual property so long as they comply with all relevant laws. Strata-title holders may sell their strata property without reference to the other proprietors holding strata title on units in the same premises. Strata title provides for a mechanism to resolve disputes. All owners have voting rights in regard to the management of the strata scheme.

Community title
Strata title does not cater adequately for horizontally subdivided developments, such as mediumdensity residential townhouse or villa developments. Therefore, a new title scheme has emerged, known as community title. Community title creates common property within a conventional subdivision. This allows a number of community-title holders to share common facilities. The size of the scheme may vary from a group of houses clustered around common space, to large commercial, industrial, sporting, recreational or agricultural communities, resorts or retirement developments, all with shared roadways and facilities.

Encumbrances on title
Encumbrances on title are disabilities or burdens on land that may be registered on the land title and

many have effects on the use of the land. The five main types of legal encumbrances are: mortgages, easements, caveats, leases and covenants. All of these can have an impact on the market price of a property.

Mortgages
A mortgage is an interest or guarantee offered by the borrower to the lender to obtain a loan. A borrower who takes out a mortgage is said to be a mortgagor, and the lender is termed the mortgagee. The mortgagor, under the terms of their loan, grants a number of rights to the mortgagee. The most powerful of these is that, if the mortgagor doesnt repay the loan as agreed, the mortgagee has the right to seize the property, lock out the mortgagor and sell the property under power of sale.

Caveats
A caveat in Torrens title warns anyone who might be interested in buying that property that another party is claiming an interest in it. For example, if an owner owed money to a third party, that party could lodge a caveat on the property ensuring that they were paid when the property was sold.

Easements
An easement gives one person or body a right to use or gain access through land owned by someone else. For example, an easement may give gas and power authorities access to pipes or cables or may allow someone to drive across another persons land to reach their own property. Where an easement appears on the title, special restrictions exist on the use and development of the land. Since an easement becomes part of the land, subsequent owners of the land are also bound by its terms. Easements usually relate to narrow strips of land near the boundaries of a lot. Even so, they often have a detrimental (negative) effect on land value, for example overhead power lines.

Leases
A lease grants the tenant exclusive possession over land and continues even if the property is sold, as long as the lease is current. Leases usually tend to encumber the Contract for Sale of Land rather than the actual title. Sometimes long-term residential leases are registered on title, and leases over three years for commercial or industrial property must be registered on title by law.

Covenants
A covenant is usually a restriction on the use or development of land. This is called a restrictive covenant. They may restrict the type or size of building allowed on a block, the type of materials used in construction, time frames for building, types of fences or grass to be planted.

Land tenure
Crown land - Private ownership less than fee simple title Tenure is the term used to describe interests in land, and two of the forms of tenurelicence and leaseallow occupation of land in different ways.

Licence
A land tenure licence is a right given by the owner of the land to another person to use the land for a specific purpose. However, a licence is not a right to exclusive occupancy. Some examples of licences are: Agistment is an agreement to graze livestock on another persons land in return for payment to the owner. Stock and station agents can manage this process and receive a fee. An encroachment occurs when a building or fence goes over the boundary and occupies land on an adjoining property. This situation may be recognised at law by giving a land tenure licence to the offending party. It is possible to create a formal right of way to travel over another persons land with a licence. This arrangement is not secure because such licences can be revoked or amended if the owner wishes. The right to draw and discharge water is common in rural areas, particularly where the water is used for irrigation. Early occupancy: a licence is sometimes given by a vendor to a purchaser to allow the purchaser to occupy the property after exchange of contracts but prior to the settlement of the sale.

Lease
Leases are far more common than licences. At law, a lease is a grant of an interest in land, conferring a legal right to exclusive possession of the land, to a party, for a specified period on payment of rent or some other consideration. Under a lease agreement, a tenant has the right to the use and to have peaceful enjoyment of the property for a specified period of time, subject to the terms and conditions of the lease. The four main types of lease are:

Crown lease
There are four main types of Crown leaselease in perpetuity (continuing) with either fixed or variable rentals, fixed-term lease (from 30 to 50 years, with rent review every 10 to 15 years), and permissive occupancy (variety of terms and conditions, can be terminated at will).

Commercial lease
Long-term commercial leases are taken on shops, offices, warehouses and industrial properties. If the lease is for a period of under three years, the Commercial Lease form printed by the Real Estate Institute (NSW) is used. If it is three years and over, the lease is in a registrable formthis form of commercial lease is usually prepared by a solicitor and the particulars are registered on the land title.

Retail lease
The Retail Leases Act 1994 applies to virtually all retail shops of 100 square metres or less in area. The terms of retail leases may be from six months to 25 years. This is a specialised area of property management and needs great familiarity with the legislation.

Residential lease
The New South Wales legislation, the Residential Tenancies Act 1987 provides strict procedures for residential premises rentals. The residential tenancy agreement differs from other forms of lease, especially as regards: the amount of notice to be given for termination what the tenant pays for (rent and possibly water, no other outgoings) limits to the landlords access to the premises the landlords and tenants responsibilities for the condition of the premises the mechanism for dispute resolution

Land ownership
Registration
To be legal, all titles must be registered with the relevant state government agency that administers land ownership and transfer. You can find the relevant authority in your state on the Web Links page in this learning resource.

Conveyancing Act 1919

The Conveyancing Act 1919 (NSW) deals with how land was to be described and how ownership is transferred.

Joint property ownership

When more than one person owns a property they will own it under one of two methods of co-

ownership. The two main types of co-ownership are tenants in common and joint tenancy.

Tenants in common
Where two or more people hold land as tenants in common, each is regarded as owning a discrete interest in that land. Shares held by tenants in common need not be equal; for instance, one tenant may have a three-quarter interest and the other a quarter interest. Tenants in common are said to have an undivided share and may generally deal with that share as they wish. For example, they may sell the share or dispose of it in some other way, such as in their will. People holding land as tenants in common should enter into an agreement that sets out their obligations for managing the property and restricts one partys right to dispose of his or her share without first giving the other shareholders the opportunity to buy that share.

Joint tenancy
Joint tenants do not have proportional shares in the property, as tenants in common do. Each joint tenant has a right shared with the other(s) to the whole of the property but no individual right to an undivided share of the property, as for example in a home purchased by a husband and wife. In practical terms this means that if one of the joint tenants dies first, then title to the property automatically transfers to the other. This is called the right of survivorship. Joint tenancy can be problematic, particularly in the areas of wills and divorce.