What does "encumberance to Auckland Council" mean?

[qwerty005]

Hey guys,

Happy New Year to everyone! I went to a viewing last week and on the property's title, under "Interests" it states:

12345.1 Mortgage to ANZ Bank - date/time
23456.2 Encumberance to Auckland Council - date/time
34567.3 Mortgage Priority Instrument making Encumberance 23456.2 first priority and Mortgage 12345.1 second priority - date/times.

Does anyone know what exactly the "Encumberance to Auckland Council" entails? Shouldn't the specific encumberance be made specific? Seems abit vague to be.

If the encumberance simply relates to Auckland council having first priority on the Mortgage (before ANZ) under what circumstances does this clause appear?

Thanks in advance - I've searched this forum and googled but cant seem to find any info on this.

Cheers
Karl

[speights boy]

My guess.
Council rates due.

[Damap]

Delinquent rates or court awarded fines to council.
They did well to get ahead of the bank, must be owed a lot.

[speights boy]

Importance of Priority

If an Encumbrance is registered with a priority subsequent to another encumbrance, mortgage or charge against the land, there is a real possibility that on the sale of the land, in the exercise of a Mortgagee's or Chargeholder's power of sale, a purchaser will take title to the land without the burden of the Encumbrance.

In other words, the Encumbrance will be removed from the title in the process of a transfer to a purchaser on a mortgagee sale.

In order to avoid this possibility, and ensure that the obligations secured by the Encumbrance run with the land, regardless of the actions of a mortgagee in enforcing its security, it is essential that the Encumbrance be registered as a first charge against the title.

In most cases, a Bank or other Chargeholder will agree to an Encumbrance having priority ahead of the Bank's mortgage or charge, provided its security position is not significantly affected.

http://www.brookfields.co.nz/publications/item/using-an-encumbrance-to-secure-performance-of-obligations

[John the builder]

it could be a restriction on use

I have seen them used to ensure granny flats are not let out in the future (perish the thought)

details should be on title like a consent notice?

[qwerty005]

it could be a restriction on use

I have seen them used to ensure granny flats are not let out in the future (perish the thought)

details should be on title like a consent notice?

Hey John, the only clauses on the title are the 3 in my original post - it its clean otherwise. The property is a standalone 3 bed, but has been substantially renovated which is why I feel abit uneasy and think the encumberance could be relating to the renovations.

The LIM for the property checks out - CCC has been obtained for all the renovations.

Thanks for the link and the input speights boy! He does owe the council about $2k worth of council fees but I would have never thought an encumberance would appear on the title bcos of that! So you may be right - could be due to the council fees the current owner owes.

If thats the case, wouldnt the "Encumberance to Auckland Council" clause be more common on titles? It might be me though, Im a newbie at house hunting and this is the first time I've across the clause.

[John the builder]

check with LINZ as I am sure there is a seperate notice kept of what the encumbrance is for and when it was lodged on title The info doesnt appear on title?

The CCC would not have been issued if fees were still owed?

[qwerty005]

check with LINZ as I am sure there is a seperate notice kept of what the encumbrance is for and when it was lodged on title The info doesnt appear on title?

The CCC would not have been issued if fees were still owed?

Theres nothing else on the title, but you might be onto something here John;

LIM = 2/9/2014
Title = 28/11/2014
CCC = 17/12/2014

So maybe the vendor paid up (for the CCC) and the encumberance has been removed? Easiest way might be to get the lawyer to search a current copy of the title to see if the encumberance is still on there?

[John the builder]

can be a mission to have them removed as it needs council agreeement

definitely talk to your lawyer. This is something the vendor should have to arranage for?

[qwerty005]

Update. According to the agent, the vendor has advised him that Auckland council now issues an encumbrance whenever a resource consent for new works is applied for, if the property is in or near a "flood plain".

The property I'm looking at is near a flood plain (6 doors down), not in it, but has got an overland flowpath "warning".

Seems abit like an overkill to me and weird? but its what I've been told so far.

[PTILoveYou]

Get a clause in the S&P that the Auckland Council encumbrance must be removed on or before settlement date.

If the encumbrance can't be removed, investigate why and maybe look for another property.

[Davo36]

Oh man, some nonsense advice here, sorry to be blunt.

I've seen these encumbrances on many many titles. And Gary, you can't just ask that sh*t organisation you work for to remove them. They won't.

They are often to do with the RMA as the agent has pointed out to querty005. So for instance, you see a lot of these kinds of instruments created and registered during subdivisions. So it may some something about section 224 of the RMA etc.

Or it could be one of many other things, like you can't sell this property and the property next to it separately, or the council have the right to put a stormwater pipe through the property and so on...

[Damap]

Meatloaf quote:
"You took the words right out of my mouth"

[speights boy]

Meatloaf quote:
"You took the words right out of my mouth"

Yeah right....

Delinquent rates or court awarded fines to council.
They did well to get ahead of the bank, must be owed a lot.

[Ivan McIntosh]

Davo is exactly right. Except that you can get the Council to remove outdated encumbrances, but it takes patience. They certainly won't be removing anything that still has use.

The encumbrance can be any of many many reasons. You use the number shown on the title to search the encumbrance itself. Very dangerous to assume you know what it is, easy and cheap for a lawyer to check.

If you ask nicely I'll search it for you for the princely sum of $5.