A recent amendment to the Conveyancing Act provides a
timely reminder to mortgagees of the duty to be discharged when
exercising power of sale.
Section 111A of the Conveyancing Act has been
proclaimed to commence on 1 November 2011.
The section requires a mortgagee to take reasonable care to
ensure that mortgaged land is sold for:
if the land has an ascertainable market value when it is
sold-not less than its market value, or
in any other case-the best price that may reasonably be
obtained in the circumstances.
A mortgagee who breaches the duty may be liable for damages.
What and who does it apply to?
The section applies to:
a mortgagee/chargee of land owned by an individual or a
an agent appointed by a mortgagee/chargee to sell the
mortgaged/charged land in the same way as it applies to the
mortgages and charges regardless of the date of the mortgage or
charge, but only in relation to a sale arising as a consequence of
a default occurring after 1 November 2011.
Is it really all that new?
The duty is largely identical to that contained in section 420A
of the Corporations Act, and is consistent with the
What steps should a mortgagee take to help satisfy the
There are a number of steps which a mortgagee should take to
ensure that it does not breach the duty.
Advertising - advertisements should contain all material
details, be free of errors, be conducted for a reasonable period of
time and in a variety of mediums (ie print, internet, signboard
Advice - ask the agent for recommendations as to the most
appropriate method of sale, advertising and price.
Valuation - get an independent valuation of the market value of
Supervision - mortgagees must diligently supervise their
agents. Responsibility for the agent's failings will come home
to roost with the mortgagee.
Whether or not mortgaged or charged property has been sold for
market value will ultimately depend on the specific facts and
circumstances of the sale.
Generally, where the Court is satisfied that the property has
been properly advertised and the sale has been properly conducted,
it will be inclined to treat the sale price as the best evidence of
If the mortgagee can point to evidence that it has exercised
reasonable care in conducting the sale, it will be in a strong
position to refute any claim that it has breached its duty.
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