Real Property Amendment Bill

About this Item
Speakers - Dyer The Hon Ron; Moppett The Hon Doug
Business - Bill, Second Reading

REAL PROPERTY AMENDMENT BILL

Second Reading

The Hon. R. D. DYER (Minister for Public Works and Services) [4.13 p.m.]: I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The aim of this bill is to reform the law of conveyancing by providing a much-needed new mechanism to facilitate the extinguishment of certain obsolete restrictive covenants recorded in the Torrens Title Register. The bill provides the Registrar General with the power to remove a restrictive covenant from title, firstly, in response to an appropriate application and, secondly, in certain carefully defined circumstances. The proposed legislation is the product of the recommendations made by a consultative committee set up by the predecessor of the Hon. Richard Amery, MP, as the Minister for Land and Water Conservation, the Hon. Kim Yeadon, MP, for the purpose of investigating options for the removal of obsolete restrictive covenants from title. The committee was made up of representatives from the Law Society, the Association of Property Conveyancers, the Department of Fair Trading, the Institution of Surveyors, the Department of Urban Affairs and Planning, the Attorney General’s Department and the Land Titles Office.

The legislation will allow persons who own land burdened by a restrictive covenant to lodge an application for extinguishment with the Registrar General if the covenant in question is 12 years old and it is of a type that is likely to lose its value over time. A covenant will only be extinguished pursuant to this power once certain procedural safeguards have been observed. Such safeguards are intended to ensure that the persons benefited by a covenant are notified of an application for extinguishment so that they may lodge a caveat to prevent the registration of the application and, if necessary, support their interest in court. The second method for extinguishment will only apply in defined circumstances where the Registrar General can be sure that a relevant covenant is of no practical value or has lost any practical application.

In order to understand the need for reform of the law of restrictive covenants it is necessary to appreciate something of their legal nature and the manner in which they are used. A restrictive covenant is a legally enforceable promise or agreement restricting the uses to which land may be put. The validity of a covenant as an interest in land which will bind successors in title depends on compliance with certain complex rules of law and equity. For example, in equity a restrictive covenant will not bind the successors in title to the original covenantor unless the covenant is wholly restrictive in character and does not impose any positive obligation, such as an obligation to construct a building or expend money. Section

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88 of the Conveyancing Act 1919 requires the instrument creating a covenant to set out the land burdened by the covenant and the land benefited by the covenant. The owner of benefited land may sue to enforce a covenant against the burdened owner. A restrictive covenant may be noted in the Torrens Title Register when it is created by, or properly referred to, in a registered dealing or plan.

Three of the most common types of restrictive covenants noted in the Torrens register relate to exoneration of the owner of benefited land from liability for fencing costs, restricting the nature of construction through forbidding the use of all but a certain category of building materials and a prohibition on the erection on any building of less than a certain value. Such covenants were often created as part of a new subdivision either to protect the interests of the developer who retained part of the land being subdivided or to promote the general benefit of the owners through preserving or enhancing the amenity of the area. They are still used, although latterly council planning instruments have tended to usurp their role to some extent.

These three types of restrictive covenant will be subject to extinguishment by application under the proposed scheme because they are by nature the types of covenant which are most likely to become obsolete over time. For example, 12 years after creation of a covenant restricting permissible building materials the restriction is likely to have become more burdensome by preventing the use of new types of building materials which may not have been in use when the covenant was created. In addition once all the houses in a subdivision are built and the character of the area is established the benefit flowing from being able to control the materials used for subsequent building is not as great as it once was. Fencing covenants are also likely to lose their value over time because they commonly protect a developer from making a contribution to the cost of erecting dividing fences, but only while the developer remains an adjoining owner.

Most covenants relating to a required value of structures are expressed in pounds and are clearly no longer relevant. More modern examples of such covenants would be rendered useless by the effect of inflation over 12 years. This measure is much needed and will be welcomed by those involved in conveyancing because the existing methods of releasing and removing restrictive covenants from title have proved to be inadequate in many circumstances. The owner of land burdened by an obsolete restrictive covenant usually has two alternatives for removal. The first is a request lodged with the Registrar General for the removal of the covenant from the register. Such requests must be signed by all those persons who have the right to join in a release of the relevant covenant. In practice it is often very difficult to obtain these signatures as the class of persons who must sign the request may be large, for example, all of the registered owners of an interest in the relevant subdivision.

Alternatively, if the covenant specifies a class of persons who may sign a release it may be difficult to ascertain who falls within this class according to the law. The second alternative is an application for release made to the Supreme Court pursuant to section 89 of the Conveyancing Act 1919. However, due to the narrowness of the grounds for removal and the conservative approach adopted by the Supreme Court in interpreting section 89 such applications are rarely successful, particularly if they are opposed. Even if successful, such court proceedings usually prove to be costly and time consuming.

I will now briefly outline the main requirements for the proposed application for extinguishment of a restrictive covenant. Such an application may be lodged with the Registrar General if the covenant in question is at least 12 years old, of a type that is likely to lose any practical value for the owner of an interest in the land benefited by the covenant after 12 years and it is a building materials covenant, a fencing covenant or a value of structures covenant. If only part of a covenant satisfies these criteria an application may be made in relation to that part only.

Safeguards are proposed which will protect the rights of those who own an interest in a restrictive covenant. The proposed legislation sets up a mechanism for benefited owners to be notified of an application for extinguishment of a covenant. It is envisaged that the Registrar General will either attempt to give notice to all benefited owners or receive evidence by statutory declaration that all benefited owners have been served with an appropriate notice. For two years after the commencement of the legislation a period of notice of at least three months will be required. Thereafter the period of notice required will be at least one month.

The service of notice will provide an opportunity for an owner of land benefited by a covenant or a person with a right arising out of a covenant to lodge a caveat against the application. The availability of a caveat mechanism will allow the person with an interest under a covenant to prevent the Registrar General from granting an application for extinguishment at any time up until the period of notice has expired. The lodgment of a caveat, which currently attracts a fee of $55, will provide a simple and inexpensive method of preventing an application from being recorded.

The amendments provide that the right to lodge a caveat will be lost once the period of notice has expired. This will allow an applicant, by the end of the notice period, to be sure of how many benefited owners have caveated before deciding whether to lodge a request for a lapsing notice to be prepared for each caveat. A limit on the time available to caveat will prevent a caveator from unfairly delaying the recording of an application. It would be unfair for an applicant to be faced with a succession of caveats lodged by different caveators, each lodged before the previous caveat has lapsed.

Once a caveat has been lodged against an application the applicant may take advantage of the existing caveat lapsing procedure to call upon the caveator to decide within twenty-one days either to allow the caveat to lapse or to seek a court order preserving the caveat and the relevant covenant. It is intended that such an order may be obtained from the Supreme Court if it is shown that a caveator who claims the benefit of a restrictive covenant has an interest which amounts to an equitable interest over the burdened land. If a caveator’s claim is based on a right found in a covenant to extinguish the covenant or consent to extinguishment then the existence of that right must also be proved, at least on a preliminary basis, before an order extending the caveat may be obtained. The power of the Supreme Court to suspend the lapsing procedure and extend the operation of a caveat is already provided by section 74K of the Real Property Act.

The existing prohibition against abuse of the lapsing procedure through repeated requests for the lapse of the same caveat will apply in relation to all valid caveats against extinguishment applications. An appropriate application may be granted by the Registrar General and recorded in the register once the notice period has expired, subject to any relevant caveat, and the lodgment of evidence necessary to prove service of such notice. A second more discretionary power is proposed which would allow the Registrar General to extinguish a restrictive covenant in whole or in part and record such extinguishment

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in the Torrens register where the Registrar General is satisfied that the relevant covenant is of no practical application or value. The Registrar General regularly encounters instances where following the registration of a plan at the Land Titles Office it is patently clear that restrictive covenant notifications on relevant titles can no longer retain any practical value for the owner of the land expressed to be benefited by the covenant.

For example, in situations where all of the land benefited and burdened by a covenant has been consolidated into one parcel, the new owner of the relevant land would not receive any practical benefit from the restrictive covenants which had previously benefited part of the land. Conversely, where a plan of subdivision is lodged for registration it is counterproductive for a notification of a fencing covenant burdening the relevant land to be carried forward and noted on the titles of all the new lots in the subdivision. It may only be appropriate for the fencing covenant to be noted on the titles to the lots on the boundary of the subdivision.

The proposed scheme is designed to achieve a fairer balance between the interests of those who benefit from covenants and those whose lands are burdened by them. The conditions which must be met before the Registrar General may exercise the proposed powers are intended to allow the beneficiaries of a relevant covenant to have a reasonable period to enjoy the benefit of the covenant without allowing the burden of an obsolete covenant to apply forever to the detriment of the community. This legislation will help in the quick, cheap and effective removal of restrictions which have run their course and are now more of a nuisance value. At the same time safeguards are provided to ensure that valid claims against the removal of valuable rights can be enforced in the courts. I commend the bill to the House.

The Hon. D. F. MOPPETT [4.13 p.m.]: The Real Property Amendment Bill is one of a sequence of bills that have been introduced in recent years in an effort to improve and modernise the practices of the Land Titles Office. The Opposition will not oppose the bill; indeed, it welcomes it because it is a practical measure that has the support of interested groups. I understand that in formulating the measures in the bill that expedite in certain circumstances the removal of restrictive covenants, a number of organisations were consulted, including the Law Society of New South Wales, the Association of Public Conveyancers, representatives of the Department of Fair Trading, the Institute of Surveyors, the Department of Urban Affairs and Planning, the Attorney General’s Department and the Land Titles Office, which has been deeply involved.

The bill seeks to overcome the burden that restrictive covenants place on land titles when, after a lapse of time, they become anachronistic and inappropriate to modern practice. At present these restrictive covenants can be removed but the processes are cumbersome and expensive. Two methods are available. The first is by application to the Registrar General, but under the existing provisions these applications can encounter major difficulties and are often unproductive. The second is by application to the Supreme Court, though all honourable members would realise that that is an expensive process that may be beyond the means of many people.

This bill overcomes these difficulties by empowering the Registrar General to extinguish certain restrictive covenants, especially where they are no longer of any practical value. This applies only to covenants involving building materials, fencing and the value of structures, and then only where the structures have been in existence for 12 years or more. This will alleviate concern that this may be a short cut to overcome covenants that have been genuinely put in place and are still relevant. An illustration of past restrictive covenants that were put in place on properties in good faith was the requirement to use slate roofing. Shortly after the war that was considered reasonable to maintain a certain building standard. Small supplies of slate are available from Wales when it is necessary to maintain buildings of great historic value, but slate is an expensive medium and much of the slate that is used is recovered from buildings that have been demolished. It is inappropriate for that covenant to remain without review as a long-term requirement.

There was also a common requirement 12 years ago to build in brick or stone, which may have been appropriate at the time. However, it is no longer appropriate, particularly as the purchase of stone poses an insurmountable difficulty for property owners whose properties are subject to this covenant. An example was given in another place whereby land in the Blue Mountains was subject to a covenant that structures erected there must be in timber. In view of the bush fires that have raged over the Blue Mountains, even in recent times, that also would be seen as inappropriate.

Another anomaly that sometimes arises is that the value of an improvement is specified in a covenant. Obviously, to reflect what is seen at the time as a minimum standard for development on a property, and to ensure that a development is sympathetic with other developments and in accordance with the value of property in the area, some covenants are written in what are now outmoded terms. Some even use terminology such as pounds, shillings and pence, and stipulate values as low as the equivalent of �200, which these days would probably only erect a dog kennel. I have studied the bill, and I have been assured that persons who benefit from a protected covenant will be notified when these procedures are to be invoked to the advantage of those who wish to extinguish the caveats. However, it is important that anyone who may be adversely affected is notified, so that a
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person who has strong feelings about extinguishment of a covenant may object to that proposal.

It has come to my notice also - and it is very much to my satisfaction - that useful covenants, such as building height restrictions, are not affected or jeopardised in any way by this bill. In many Sydney areas it is not uncommon for covenants to be placed on developments. That is not so in Quambone or Coonamble, where there is no great fear about high- rise buildings obstructing views. However, such covenants are jealously regarded in other parts of New South Wales, and certainly in the area in which I lived in my youth, the leafy suburb of Vaucluse. That whole area has a pleasing, sloping aspect, and people there are extremely concerned about the possibility of high buildings being erected on any property that is sold. It would be wrong if such covenants on building heights could be whisked away in a procedure that in a sense is initiated by an applicant but might not give full consideration to the interests of people on surrounding properties. I think I covered this point in earlier remarks, but for such people I should reiterate that my understanding is that building height restrictions are not covered by this bill.

It is also reassuring that this legislation will not impair the rights of people who, under the Environmental Planning and Assessment Act, believe the lifting of these caveats would jeopardise them, particularly where their objection, for instance, is sustainable because of the anachronistic nature of the lifting of the covenant. Those people will still be able to take action under the provisions of that Act to protect what they regard as their interests. This legislation serves a good purpose in making redress available to people who are unduly burdened by covenants that may have been put in place ages ago but which no longer apply. This legislation will make their lot much easier while not jeopardising in any way the rights and protections of which we should be conscious. So the Opposition will facilitate the passage of the bill through this House this afternoon.

The Hon. R. D. DYER (Minister for Public Works and Services) [4.23 p.m.], in reply: I thank the Hon. D. F. Moppett for his support for, and comments regarding the merits of, the bill, which I am happy to commend to the House.

Motion agreed to.

Bill read a second time and passed through remaining stages.

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