Housing is considered safe because it’s not a “take it or leave it” type of investment like shares or savings.
Whether or not we are property investors, we all need a place to call home and private land ownership satisfies our need for security.
Our right to buy or sell property is given to us under common law and expressed in permanent property titles.
But this brings us to a contradiction - our title systems are based on the ownership of land, while the housing market is about what’s on it, such as a house or block of home units.
We don’t actually buy these improvements; they come with the land they are on.
The land authorities register and transfer land ownership under several different title systems and because each system is different, there are many hidden traps lying in wait for unwary investors when it comes to buying, owning and selling property in Australia.
On the other hand, these differences can also offer lucrative opportunities to informed investors who understand and make use of them.
Every property has a unique street address so that we can send or receive mail and advertise them for rent or sale.
Addresses however, have nothing to do with the identification of land as part of the transfer of ownership process.
When we buy and sell property, addresses mean nothing - we are dealing with a portion of land uniquely identified in Registers, Volumes, Folios, Indexes, Deposited Plans and Strata Plans held and maintained by state or territory authorities or departments.
The first rule of property purchase is therefore to satisfy yourself that the location of the land is correct as measured by distance and by the number of blocks from the nearest cross street as shown on its registered title plan.
This is often done as part of an identification survey by a registered surveyor, because is also important to ensure that the property’s improvements, such as the house, garage and other outbuildings are located within the boundaries shown on the plan and not built over easements or rights of way.
When Jack started his owner-builder project, he mistakenly assumed that the boundary pegs as shown in the Jack’s street diagram marked his block of land as shown in the Jack’s foundations diagram and he started building his house accordingly.
It was only when his bank required an identification survey to provide finance that the survey indicated that the boundaries of his block of land were actually as shown in Jack’s boundaries.
Jack had no option but to bulldoze the work he had completed and start all over.
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Such expensive mistakes are easily made and also easily avoided, but the risks and also some opportunities come from not only incorrectly identifying property locations and boundaries – they can arise from conditions imposed on the title systems that we use to transfer ownership.
Not only is it essential to ensure that the dwelling and other improvements such as fences and sheds are correctly located within the boundaries of a property, there are often restrictions and warnings called caveats and encumbrances which have been placed on titles by previous owners and other third parties with an interest in the property, such as lenders and utility service providers.
They can include rights of way, easements for the inspection and maintenance of water, sewerage or drainage pipes and restrictions called caveats on the use or sale of the land.
While these are always included on the Torrens Certificate of Title, they may not be so easily discovered with other forms of title.
Land use is also regulated by zoning and overlays
Possessing title to a property even when there are no restrictions or caveats does not give us free reign to build or develop.
Local councils regulate the nature of land use under their control by setting different land zones.
These limit the use of land within each zone to various types of residential, commercial, industrial, mixed or rural purposes, as well as controlling building heights, floor, lot sizes and housing density.
Land zones can change to cater for the demands and needs of the local population and State governments sometimes also override council zoning decisions and change zoning types and definitions.
In some localities there are heritage overlays in place which limit renovations and developments to protect buildings of historic significance.
There may also be other overlays which prohibit the removal of trees, protect certain types of vegetation or preserve sensitive indigenous sites and areas.
The key is to always make title, zoning and overlay research part of your due diligence, even if you are buying an existing dwelling:
- What is the current title system applying to the property?
- What opportunities, if any, would changing the title system provide?
- Have all existing encumbrances, easements and caveats been complied with?
- Are there any caveats, writs or notices which may affect the property’s sale?
- What is the potential for development or renovation under current zoning?
- Are there any proposed zoning changes and what opportunities do they provide?
- What overlays apply to the property and do they offer any opportunities?
Making these checks will ensure that any risks associated with your purchase are minimised and they may help you discover some opportunities that have been overlooked by others.