In the case, the owner of a piece of land had subdivided it into two lots. A condition of the subdivision imposed by the local council was that a right of way had to be created over lot 2 over the benefit of lot 1.

No right of way was actually created at the time, but the registered plan of the sub-division referred to a proposed right of way and diagrams on the certificates of title issued for the two lots referred to it, even though they did not show its existence.

Lot 2 was later further subdivided, but the registered plan of the new subdivision did not refer to the proposed right of way, nor did the certificates of title to the new lots.

When the company that owned the land came to sell, it was not obliged to disclose the existence of the proposed right of way to the purchaser. This is because the regulations governing the sale of land require disclosure of restrictions only on the use of land as set out in "deeds, dealings and other instruments lodged or registered in the Land Titles Office that are shown on the relevant property certificate".

So the new owners had land affected by a right of way they had been unaware of, and a dispute arose.

In its final decision, the Court of Appeal found that the Council's consent to the original sub-division created a right, which could be relied on by all later transferees of the lot, and that this right took precedence over the system of registration of titles. The owners of lot 1 were entitled to insist on their right of way.

The case highlights the need for careful professional legal advice when considering a contract for the sale of land. Searches need to cover not only the development consent by which a lot being purchased was created, but also any earlier sub-divisions of which the lot once formed a part.

Your solicitor can advise you on steps to help ensure that you buy the land you'd intended. One option your solicitor might consider is insertion of a special condition in a contract to allow revoking the contract if, prior to settlement, a search discloses a condition of consent which had not been complied with.

Reproduced from In Touch With The Law, published by the Law Society of NSW