Easements and covenants: the title traps that can sink a flip

Easements and covenants are the two title restrictions that catch flippers out most, because neither shows up when you walk through the house and both can quietly undo the plan your margin depended on. You buy a tired place on a big block, picture the extension, the second dwelling or the subdivision that turns a thin deal into a good one, and then the title search comes back with a sewer easement down the side or a covenant that says single dwelling only. The land hasn't changed. What you're allowed to do with it has. Here's how I check for both before I'm committed, not after.

This is general information, not legal advice. Easements and covenants are creatures of property law, they're worded differently on every title, and the rules for changing them differ by state. Get your conveyancer or solicitor to read the actual instrument on the title you're buying before you rely on anything here.

What easements and covenants actually are

They sound similar and they sit on the same title, but they do different jobs.

An easement is a right for someone else to use part of your land for a defined purpose. The classic ones are a drainage or sewer easement (a pipe runs under your yard and the water authority needs access to it), a right of carriageway (a neighbour has the legal right to cross your land to reach theirs), and easements for stormwater or electricity. The land is still yours, but you generally can't build over or obstruct the easement without the consent of whoever benefits from it, and a utility can require you to remove a structure to get at its pipes. In practice an easement can sterilise a strip of the block for building.

A restrictive covenant is a private restriction on what you can do with the land, agreed at some point in the past and registered so it binds every future owner, you included. Common ones bar a second dwelling, limit you to a single storey, dictate building materials or a minimum floor area, set a building line, or prohibit further subdivision. A covenant is not a council rule, so here's the part that trips people up: a planning permit does not override it. You can have development approval in hand and still be stopped by a covenant a neighbour is entitled to enforce.

How to check for easements and covenants before you buy

Both are recorded on the certificate of title and its associated documents, so this is a title job, done before you exchange.

• Order a title search and the plan. In NSW the easements and covenants are set out in the Section 88B instrument lodged with the deposited plan under the Conveyancing Act 1919. In Victoria they appear on the register under "Encumbrances, Caveats and Notices" and on the plan of subdivision. In Queensland they are registered dealings on the title. Your conveyancer pulls these as a matter of course, but tell them what you intend to build so they read the wording with your project in mind, not just as a box to tick.
• Read the actual words, not the summary. "Restriction on the use of land" on a title tells you nothing until you read the instrument behind it. A covenant that says "one dwelling house" kills a duplex or a granny-flat play; one that dictates roof pitch is a nuisance you can design around. The difference is in the text.
• Map the easement onto the block. Work out where the pipe or right of way actually runs. A sewer line down the boundary might cost you nothing; one through the middle of where your extension or second dwelling has to go is a different story.
• Don't expect the inspection to catch it. A building and pest inspection tells you whether the house is sound, not what the title lets you build. Title restrictions and building condition are two separate checks, and only one of them turns up on an inspection report.

This is really part of a proper property due diligence checklist: title, planning and finance all get checked before you're committed, and easements and covenants sit on the title line of that list.

Why they can sink a flip's margin

On a lot of flips none of this matters. You're doing a cosmetic refresh inside the existing footprint, the easement is a sewer line down the fence you were never going to build over, and there's no covenant worth the name. Check it, confirm it, move on.

The deals where it bites are the ones where the margin comes from doing more with the block, which is exactly the kind of deal flippers chase because that's where the real money is. If your numbers assume you can add a second storey, put a dwelling out the back, extend to the boundary or split the block, an easement or a covenant can take that straight off the table, and you've paid a price that only made sense with the upside in it.

A covenant restricting you to a single dwelling kills a granny flat or dual-occupancy play no matter what the zoning allows. A no-further-subdivision covenant stops a subdivision before you start, even on a lot the council would happily cut in two. An easement running through the building envelope can shrink what you can add to the point where the extension no longer pays. The land looks like it supports the strategy; the title says otherwise.

Can you get an easement or covenant removed?

Sometimes, but never assume it and never price the deal as though it's a formality.

An easement that benefits a utility usually can't be touched without that authority's written consent, and it exists to protect infrastructure, not to accommodate your floor plan. You can often apply to build over or near one, a sewer for example, on conditions: concrete encasement of the pipe, special footings that span it, a minimum clearance for access. That's consent to build carefully, not removal, and it costs time and money.

A restrictive covenant is harder again. Removing or varying one generally means either getting the agreement of everyone who benefits from it (often easier said than done, and sometimes impossible to even identify them all) or a formal application, in some states to the Supreme Court, to have it modified or extinguished. Those are slow, uncertain and not cheap, and an objecting neighbour can stop you. If your whole flip thesis rests on getting a covenant removed, you don't have a deal, you have a punt.

How I handle easements and covenants on a flip

My rule is simple: the title restrictions get checked before the strategy gets locked in, not after.

1. Order the title and read every encumbrance before I exchange, and brief the conveyancer on what I actually intend to build so they read the instruments against the plan.
2. Test the strategy against what the title allows, not just what the zoning allows. A feasibility is only honest if it counts the strategies the block can actually support, and a covenant or an easement can rule several of them out.
3. Price the deal on the fallback. If the extension or subdivision is off the table, does the flip still pencil as a straight cosmetic refresh? If it only works with the upside, and the upside depends on a covenant being removed, I pass.
4. Make the contract conditional where the restriction is live. If a deal only works subject to build-over consent or a covenant variation, I'd rather write that in as a condition than own the problem after settlement.

That's the same discipline behind every maximum offer: the profit is set at the buy, so the buy has to assume what the title actually permits, not the best case.

FlipPro's council and zoning data is live in NSW, VIC and QLD, so the tool shows you what a block is zoned and overlaid for in those states. The title restrictions, the easements and covenants themselves, live on the certificate of title, and that's a search your conveyancer runs. Use both: the zoning tells you what the council allows, the title tells you what you're allowed, and a flip only works when both say yes.

Before you bank the big-block upside on your next flip, run the whole deal, fallback included, through a full analysis or a sample analysis, and get the title searched before you exchange. A covenant you read in time is a filter. One you find after settlement is a loss.

This is general information only and is not legal, financial or conveyancing advice. Easements and restrictive covenants are worded individually on each title and the rules for building over, varying or removing them differ by state, authority and property and change over time. Always have your own conveyancer or solicitor search the title and read the actual instruments for your specific property before you buy or start work.