Encroachments onto Neighbouring Land: Court Orders, Compensation plus Builder Liability in Australia

What it is

An encroachment occurs when a structure on one parcel of land extends, even slightly, onto an adjoining parcel. The encroaching structure is most often a retaining wall, an eaves overhang, a footing, a balcony or a fence post that sits across the surveyed boundary. The encroachment can be intentional or accidental, and the legal consequences depend on which it is.

The starting point at common law is that any unauthorised entry of one person's structure onto another person's land is a trespass. The neighbour whose land has been encroached upon has the prima facie right to a mandatory injunction requiring removal of the encroaching structure. That is the harsh default position that the New South Wales legislature softened in 1922 by enacting the Encroachment of Buildings Act 1922 (NSW). The Act gives the court a discretion to order compensation, transfer of the affected strip of land or an easement instead of removal, depending on the circumstances [1][2].

Scope of the Encroachment of Buildings Act 1922 (NSW)

The Act applies to encroachments of buildings, which the legislation defines broadly to include any substantial building structure of a permanent character together with parts such as walls, footings, eaves and verandahs. A fence or a retaining wall on its own is not always a building under the Act, although case law treats substantial retaining walls as falling inside the definition. Either the adjacent owner or the encroaching owner can apply to the court for relief under section 3 of the Act [1][2].

The court for these applications is the Land and Environment Court of NSW. The Act also preserves a parallel pathway in the Supreme Court of NSW for related title questions [1]. Other states do not have a directly equivalent statutory regime. Queensland builders rely on the Property Law Act 1974 (Qld) section 184, which provides similar relief for mistaken improvements made on a neighbour's land [3].

Court orders the judge can make

Under section 3 of the Encroachment of Buildings Act 1922 (NSW), the court may make any of the following orders. It may order payment of compensation to the adjacent owner. It may order a conveyance or transfer of the affected strip of land to the encroaching owner. It may grant the encroaching owner an easement or other proprietary right over the strip. It may order removal of the encroachment. The court chooses among these options by weighing the discretionary factors in section 3(3) [1][2].

Discretionary factors

Section 3(3) lists six factors the court weighs. The first is whether the application was made by the adjacent owner or the encroaching owner. The second is the situation plus value of the affected land. The third is the nature plus extent of the encroachment. The fourth is the character of the encroaching building plus the purposes for which it may be used. The fifth is the loss plus damage to the adjacent owner. The sixth is the loss plus damage to the encroaching owner if forced to remove the structure. The sixth factor is the one that usually persuades a court to grant compensation rather than order demolition [1][2].

Compensation floor

The Act sets a statutory floor for compensation where the court orders a conveyance, transfer, lease or easement. If the encroaching owner satisfies the court that the encroachment was not intentional plus did not arise from negligence, the floor is the land value of the strip. In any other case the floor is three times the land value [1][2]. Builders should treat that three-times multiplier as a heavy financial penalty for sloppy site set out.

Practical guidance for builders

Three workflow controls reduce encroachment risk on residential sites. The first is an identification survey before excavation on any site with an old or doubtful fence line. The second is a building survey at slab stage to confirm the footing sits inside the boundary. The third is a final survey before practical completion to confirm eaves, gutters plus balcony overhangs do not project across the line. The Building Code of Australia under the National Construction Code Volume Two does not directly regulate boundary clearance for eaves, although the planning scheme setback rules usually do [4].

Insurance and contract allocation

Most domestic building contracts allocate boundary risk to the owner unless the builder has carried out the survey. The Master Builders Association and HIA standard contracts both include a clause to that effect. Builders who supply a fixed price including survey work should make sure their construction insurance under the Insurance Contracts Act 1984 (Cth) covers the cost of demolition plus rebuild if a court orders removal of an encroaching structure [5].

Recent caselaw direction

Recent decisions in the Land and Environment Court have shown a clear pattern. Where the encroachment is minor, was accidental plus where demolition would be disproportionate, the court grants an easement or transfer with compensation. Where the encroachment is substantial or where the encroaching owner ignored warnings during construction, the court is willing to order removal even at significant cost. Builders should treat any boundary query during construction as a stop work issue, not a paperwork issue.