Most Form 2 disclosure failures in Queensland are not caused by exotic legal issues. They are caused by the things sellers forgot to mention because they didn’t think they mattered.
The handshake agreement with the neighbour about the shared driveway. The verbal arrangement that mum can live in the granny flat for life. The letter from a previous council 11 years ago about an undocumented easement. The unregistered building approval from the seller’s brother-in-law who is “basically a builder.”
Under the Property Law Act 2023 (Qld), every one of these can be the basis for a buyer to terminate the contract - even on the day of settlement. This guide explains how unregistered encumbrances and oral agreements actually behave under the disclosure regime, and how to flush them out before they kill a deal.
What “encumbrance” means under the Act
An encumbrance, in plain English, is anything that affects the rights of the owner of the land. The obvious ones - registered mortgages, easements, covenants, caveats - show up on a title search and are easy to disclose. The dangerous ones are the unregistered encumbrances: rights or restrictions that exist in fact but don’t appear on the title register.
Common examples in Queensland include: oral easements (handshake rights of access); unregistered leases; unregistered options to purchase; informal arrangements about shared structures (driveways, fences, retaining walls); equitable interests (someone who paid for part of the land but isn’t on title); and tenant-in-place rights that haven’t been documented in writing.
The disclosure obligation, in practice
Form 2 requires the seller to disclose registered and unregistered encumbrances. That second category is where most sellers get tripped up, because they don’t know what they don’t know.
If a seller knows about an unregistered encumbrance and fails to disclose it, the buyer has the right to terminate the contract and recover the deposit. If the seller doesn’t know about it but ought to have known, the position is more complicated, but the practical risk to the agent and the agency remains.
The Act does not let sellers off the hook because they “forgot” or because the issue felt informal.
Oral agreements: the highest-risk category
Oral agreements about land are where careful sellers and seasoned agents come unstuck. A common scenario: a seller has had an agreement with the neighbour for 15 years that the neighbour can use the back gate to access their bins through the seller’s yard. It has never been written down. The neighbour is friendly. The seller never thought of it as an “easement.”
When the new buyer takes possession, the neighbour continues to use the gate. The buyer objects. The neighbour produces the previous owner as a witness. Suddenly there is a dispute about an unregistered easement that should have been disclosed.
The buyer’s right to terminate, depending on timing, may already be gone - but the agent and the seller now face damages claims, and the buyer’s lawyers will be combing the Form 2 for any disclosure gap they can use as leverage.
How to surface unregistered encumbrances at listing
The agent’s job at listing is to ask the questions a seller wouldn’t naturally answer. A standard SearchX intake interview probes for: any access arrangements with neighbours; anyone living on the property who is not on title; any historical agreements about boundaries, fences, walls, or driveways; any informal arrangements with a relative or business partner about ownership; any letters from council, body corporate, or neighbours; any work done on the property by someone who wasn’t licensed.
Sellers will often say “no” to a high-level question and then, three follow-ups later, remember a relevant arrangement. This is the work that has to happen before listing, not at contract.
The body corporate trap
For unit and townhouse listings, the same principle applies inside the body corporate. Unregistered exclusive use areas. Verbal arrangements about car parks, storage cages, or common property. Side agreements between the body corporate and a neighbouring developer. These are encumbrances on the lot in the legal sense, even when they don’t appear on the title.
Body corporate certificates (Form 33) catch some of this, but not all. The selling agent has to ask the seller directly.
How SearchX surfaces what title searches miss
SearchX is built around a structured seller intake interview that is specifically designed to surface unregistered encumbrances and oral agreements. The questions are written by lawyers, refined by case experience, and tested against the actual termination patterns we see in the market. The platform then cross-checks the seller’s answers against title and body corporate data and flags inconsistencies for legal review.
This is the part of disclosure preparation that is hardest to do well in-house, and where the cost of getting it wrong is highest.
FAQs
What is the difference between a registered and unregistered encumbrance?
A registered encumbrance appears on the title. An unregistered encumbrance exists in fact (sometimes contractually, sometimes equitably) but isn’t on the register.
Do I have to disclose a verbal agreement with a neighbour?
If it affects the use or rights of the land, yes. The form of the agreement doesn’t reduce the disclosure obligation.
What if the seller doesn’t know about an issue?
The Act is unforgiving. Buyers may still have termination rights depending on the materiality of the issue. The seller’s lack of knowledge is not always a defence.
Does a title search catch all encumbrances?
No. It catches registered encumbrances. Unregistered encumbrances must be disclosed by the seller and surfaced through a thorough intake process.
Can I be sued for missing one?
Yes. Both the seller and the agent have exposure if disclosure obligations are not met.