When buying property or transferring title in Australia, a title search (title search) is usually required. It is one of the most important steps in a property transaction, covering both title investigation and clearance. Generally, the buyer’s solicitor will order a title report from the Title Company and conduct a thorough review of the property’s ownership records — checking whether there are any outstanding mortgages, unpaid land tax, strata management fees, council fines or other debts registered against the property. If the property solicitor identifies any defects on title, the vendor must clear those defects at this stage to protect the buyer’s interests after settlement. Only once the title is confirmed to be clear and the other settlement conditions are satisfied can the parties arrange settlement. The reason a title search is done is that it helps the buyer understand the full picture and history of the property. Just how important is a title search, and what should you look out for? In this article we’ll walk you through it.
What a title search tells you
A title search will typically tell you the following:
1. The owner of the property
If you want to know who owns a property, a title search will tell you. The title search shows the names of every owner registered on title. Where there are multiple owners, the title search will show whether they hold as tenants in common or joint tenants. At NS Legal we have received many enquiries from clients who did not understand the difference between tenants in common and joint tenants at the time of purchase. The key distinction is this: for property held as joint tenants, when one owner passes away, that owner’s share automatically passes to the other joint tenant(s); this does not happen with tenants in common.
An example
- A and B are a married couple. They buy their home as joint tenants. When A passes away, A’s half share automatically passes to B, and B owns 100% of the property.
- C and D are a married couple. They buy their home as tenants in common in equal 50:50 shares. When C passes away, D does not automatically take C’s share. Who inherits C’s 50% share is determined by succession law and depends on C’s will and other information.
2. Easements
An easement, sometimes called a right over land, generally refers to a non-profit interest that a person may enjoy over land owned by another, giving them a specific and limited right to use that land. A title search will disclose any easements. The most common easement is a right of way — for example, your property may be subject to a right of way allowing your neighbour to cross your lawn to access a road, or allowing other parties to cross your land. Easements can restrict how you use your land and prevent you from building on it, so it is important to understand any easements before you buy or renovate.
3. Covenants
Covenants can restrict what may be built on the land, where it may be built, what materials may be used, and more. Breaching a covenant can have serious consequences, so it is essential to know whether your property is subject to any covenants — and a title search will give you that information.
4. Caveats
This is something to pay particular attention to. Another purpose of a title search is to tell you whether there are any caveats over the property you are about to buy. In Australia, if a person has an interest in your land, they may lodge a caveat to prevent you from selling or dealing with the property. That is why doing a title search before settlement is so important. We have previously written a dedicated article on caveats — see Caveat — An Effective Way to Protect Your Property Interests.
5. Mortgages
Another important piece of information you can obtain from a title search is mortgage information. The title search will show any registered mortgages, typically held by a bank. In a property transfer, the vendor must discharge all mortgages before settlement; otherwise significant delays can occur.
6. How many times the property has changed hands
On top of this, you should also check how many times the property has been transferred. If it has gone through many owners over a short period, you should take extra care and may want to investigate whether there is an underlying issue with the property.
What a title search cannot solve It is worth noting that a title search cannot uncover every issue with a property.
For example, whether a property has quality or structural defects cannot be revealed by a title search — these need to be addressed through a building inspection or other means.
In summary, a title report can help a purchaser obtain a great deal of important information to help them assess whether a property has any issues. A title report will generally cover the following:
- The title insurance position the buyer will take up at settlement;
- The property’s transaction history;
- Mortgage position: mortgages and charges attach to the property itself, not to the owner. If an existing mortgage is not picked up in time, any outstanding loan left by the previous owner can become the new owner’s responsibility to repay;
- The property’s tax position;
- Any unresolved legal disputes between previous vendors and purchasers.
Final thoughts
NS Legal reminds you that when buying property in Australia, it is important to complete a title search in advance to avoid ending up with a problematic property and to protect your rights as a buyer. A title search not only tells you about the property so you can better understand what you are buying, it also helps you avoid many of the hidden traps involved in purchasing property in Australia. If you have any questions about property transfers or transactions, please seek assistance from a qualified property solicitor.
We have written a series of articles on Australian property purchases, property tax and related legal issues to answer common questions about Australian property. Feel free to continue reading:
Even with PR you may still have to pay this surcharge — know this before you buy!
Legal issues to be aware of before buying property in NSW
Buy a home with as little as a 2% deposit? Who is eligible? Read these notes carefully!
Caveat — An Effective Way to Protect Your Property Interests
Solicitor or conveyancer: which should you use when buying property in Australia?
