Discovering a title problem after settlement is every New Zealand property buyer's nightmare. Whether it is an undisclosed easement, an incorrect boundary, a missing discharge of mortgage, or a covenant you were not told about, the question is always the same: what can you do now? This guide walks you through the most common post-settlement title issues, your legal rights, and the practical steps to resolve them.
Common Title Problems Found After Settlement
Undisclosed Easements
Easements are among the most frequently discovered post-settlement issues. You might learn that a neighbour has a right of way across your driveway, or that a utility company has access rights through your backyard. If the easement was registered on the title at the time of purchase, the law generally considers that you had constructive notice of it — even if you did not actually see it. This is why a thorough pre-purchase title search is essential.
If you are buying a property, ordering a Record of Title with Diagram ($42.90) will show all registered easements. Following up with a copy of the relevant instruments ($39.90) gives you the full terms of each easement, so there are no surprises after the keys are in your hand.
Outstanding Mortgages Not Discharged
Sometimes a vendor's mortgage is not properly discharged from the title before settlement. This can occur due to administrative errors, delays at the registry, or bank processing issues. The result is that the mortgage still appears on your title, which can affect your ability to finance or sell the property.
If this happens, your solicitor should contact the vendor's solicitor and the lending institution immediately to arrange the discharge. In most cases, this is resolved within days. A Guaranteed Search ($45.90) before settlement can catch this issue before it becomes your problem.
Covenants You Did Not Know About
Land covenants can restrict what you build, how you use the property, or even what colour you paint your house. Discovering a covenant after settlement that prevents you from building a second dwelling or running a home business can be devastating. Like easements, registered covenants are generally considered to be within your knowledge if they appear on the title.
Boundary Discrepancies
If the physical boundaries of the property do not match what is on the title — for example, a fence that encroaches on a neighbour's land — this can lead to disputes. Boundary issues are particularly common with older properties where fences were placed informally decades ago.
Ordering Cadastral Survey Plans ($49.90) before purchase helps you understand exactly where the legal boundaries lie, so you can identify discrepancies before committing to the purchase.
Caveats Lodged by Third Parties
A caveat is a warning on the title that someone else claims an interest in the property. If a caveat appears after settlement — or if one was present but you did not understand its implications — it can prevent you from dealing with the property freely. Caveats can be lodged by builders, contractors, former partners, or anyone with a claimed equitable interest.
Your Legal Rights After Settlement
The Property Law Act 2007
Under the Property Law Act 2007, vendors provide implied warranties when they transfer property. These include the warranty that the property is free from encumbrances other than those disclosed, and that the buyer will enjoy quiet possession. If a vendor breaches these warranties, you may be entitled to:
- Damages — compensation for the loss you suffer because of the undisclosed issue
- Cancellation — in serious cases, the ability to unwind the transaction
- Specific performance — requiring the vendor to fix the problem
However, these warranties are subject to the principle of caveat emptor (buyer beware) where the encumbrance was registered on the title. If the issue was visible on the title and you or your solicitor failed to identify it, your remedies may be limited.
The Contractual Remedies Act 1979
If the vendor made representations about the property that were misleading or incorrect, you may have a claim under the Contractual Remedies Act. This could apply if, for example, the vendor told you there were no easements when one was in fact registered.
The Fair Trading Act 1986
In cases where a real estate agent or the vendor made misleading statements about the property, the Fair Trading Act may provide additional remedies. This is particularly relevant if the issue was actively concealed rather than simply not disclosed.
Practical Steps to Take
Step 1: Get a Current Title Search
The first thing to do is obtain a current copy of the Record of Title. This shows you exactly what is registered as of today. Compare it with the version your solicitor obtained before settlement. Any new registrations since the pre-settlement search could be significant.
Step 2: Review the Sale and Purchase Agreement
Check the agreement for any warranties, representations, or special conditions. Did the vendor warrant that the property was free from certain encumbrances? Were there specific disclosures about easements or covenants? The agreement is the starting point for understanding your rights.
Step 3: Check for Title Insurance
If you obtained title insurance as part of your purchase, check the policy. Title insurance can cover losses arising from undisclosed encumbrances, boundary disputes, fraud, and other title defects. This is often the fastest and least stressful way to resolve a post-settlement title issue.
Step 4: Contact Your Solicitor
Your conveyancer or solicitor is your first point of contact. They can review the title, compare it with the pre-settlement search, advise you on your legal position, and correspond with the vendor's solicitor if necessary. In many cases, title issues discovered after settlement can be resolved through solicitor-to-solicitor negotiation without going to court.
Step 5: Consider a Legal Owner Search
If the issue involves a question about who owns or controls an interest on the title, a Legal Owner Search ($65.90) can provide detailed information about the current registered proprietor and any related parties.
Prevention: How to Avoid Title Problems Before Settlement
The best cure is prevention. Here is a checklist to ensure you never face a post-settlement title surprise:
- Order a full Record of Title early in the due diligence process
- Obtain all supporting instruments — every easement, covenant, and mortgage referenced on the title
- Get survey plans to confirm boundaries match the title description
- Request a Guaranteed Search close to settlement to catch any last-minute registrations
- Consider a Pre-Purchase Due Diligence Package ($189.90) that bundles all of these searches together
- Have your solicitor review every document before you sign the agreement
- Include specific conditions in the sale and purchase agreement requiring the vendor to discharge all mortgages and disclose all encumbrances
When to Seek Legal Action
Not every title problem requires litigation. Many issues — such as an undischarged mortgage — are administrative and can be resolved by the vendor's solicitor within days. Others, like an undisclosed restrictive covenant that prevents your intended use of the property, may require legal action.
You should consider seeking formal legal advice if:
- The vendor refuses to cooperate with resolving the issue
- The title defect significantly reduces the value or usability of the property
- A third party is asserting rights over your property (such as a caveat)
- You were given misleading information before purchase
- The issue cannot be resolved through negotiation within a reasonable timeframe
In New Zealand, the Disputes Tribunal can handle claims up to $30,000, while larger claims go to the District Court or High Court depending on the amount. Most title disputes settle before trial.
Frequently Asked Questions
Can I get my money back if I find a title problem after settlement?
It depends on the nature and severity of the problem. If the vendor breached a warranty under the Property Law Act 2007 or made a misleading representation, you may be entitled to damages or, in extreme cases, cancellation of the sale. However, if the issue was registered on the title and could have been discovered through a reasonable pre-purchase search, your remedies may be limited. This is why pre-purchase title searches are so important.
How long do I have to make a claim after discovering a title issue?
The limitation period for most contract claims in New Zealand is six years from the date the cause of action arises. For Fair Trading Act claims, it is three years. However, you should act promptly — delays can weaken your case and make it harder to gather evidence. Contact a solicitor as soon as you become aware of a problem.
What is the difference between a title defect and a title encumbrance?
A title defect is an error or problem with the title itself — such as an incorrect legal description, a missing plan, or a registration mistake. A title encumbrance is an interest registered against the title — such as a mortgage, easement, or covenant — that affects how you can use or deal with the property. Both can cause problems, but the remedies differ. Defects may be corrected through an application to the register, while encumbrances may require negotiation with the holder of the interest or, in some cases, a court order.
