On 21 May 2013, the Supreme Court handed down an interesting decision on the consequences of not validly creating easements.

The Facts of the Case

In Jea Holdings (Aust) Pty Ltd v Registrar-General of NSW [2013] NSWSC 587, the Supreme Court of New South Wales recently held that the registration of a Memorandum of Transfer at Land & Property Information in 1963 did not validly create the easement for parking which it purported to create.  As a result, a hotel (and its patrons) did not have the benefit of an easement to park motor vehicles on an adjacent car park (containing 198 car spaces) owned by Jea Holdings.

The Transfer in question purported to create a covenant which was really in the nature of an easement to park motor vehicles.  The Transfer specifically reserved the right for the owner of the burdened land to be able to develop the airspace above and the subsurface of the land below the easement site.

When the Transfer was registered in 1963, the covenant was recorded on the title of the hotel (benefited land), but it was not recorded on the title to the burdened land now owned by Jea Holdings.  The Registrar-General gave notice to Jea Holdings of its intention to record the easement on its title on the basis that it was an “omitted easement”, but was restrained from doing so by the Court.

Although the Transfer purported to create a covenant, the parties and the Court proceeded on the basis that the rights created by the Transfer were not those of a covenant, but an easement.

The Court’s Decision

In line with Australian authority, Windeyer AJ held that an easement for car parking can be validly created so long as it does not deprive the owner of the burdened land from the reasonable use of that land parcel in its entirety.  As Jea Holdings could use the car park and could develop its land above and below the car park, His Honour considered that it enjoyed a very substantial use of its land.  Therefore, if properly registered, the Transfer could have created the parking easement.

Owners of Torrens title land hold their land subject to easements which have been validly created, but have been omitted from title.  Valid creation arises on registration.

In this case, Windeyer AJ held that the easement had not been validly created because it had not been recorded on the title of the burdened land as was required by the now repealed section 35 of the Real Property Act 1900.  As a result, His Honour held that, because the easement had not been validly created, it was not omitted from the title.  This meant that Jea Holdings and all future owners of its land are not bound by the easement and that the hotel (and its patrons) can no longer park their cars in the car park.

The Upshot of the Decision

This case highlights the importance of properly characterising and creating valuable property rights such as covenants and easements.  It also highlights the need for purchasers, before entering into contracts to purchase land, to undertake a careful investigation of the title and Land & Property Information’s Records.  Such an investigation should avoid the disappointment of not obtaining some particular right or benefit which purchasers hope they will acquire and which form an important part of their decision to buy the property.