Fraud in land dealings has long been an issue in New South
Wales. Now the legislature is taking a preventative approach to try
to minimise the incidence of fraud.
Whether or not these initiatives accomplish a reduction of
fraudulent property related transactions is to be seen.
LAND TRANSACTIONS - SECTION 117
From 1 November 2011, section 117(1)(b)(i) of Real Property
Act 1900 (NSW) (RPA) requires that a witness certify that the
witness is an "eligible witness".
Section 117(4) of the RPA provides that a witness is an
"eligible witness" if the person:
is at least 18 years of age;
is not a party to the transaction; and
has known the signatory whose execution they are witnessing for
more than 12 month or has taken reasonable steps to ensure the
identity of that person.
The Real Property Act Regulations 2008 (NSW) prescribes
the reasonable steps to be taken by a witness to ensure the
identity of a signatory of a land dealing.
If the witness has known the signatory whose signature they are
witnessing for more than 12 months, that witness need not take
further steps to verify the identification of the signatory.
In essence, a witness will have taken the relevant reasonable
steps if the witness has sighted prescribed identification
The Registrar General may reject or refuse to accept the land
dealing for lodgement if the land dealing does not bear the
Record keeping obligations
There is no obligation on a person who is a witness to a land
dealing to keep any record of the steps taken to verify
identification, although we recommend that the witness retain a
record of the steps.
MORTGAGE TRANSACTIONS - SECTION 56C
Confirmation of identity of mortgagor
From 1 November 2011, a mortgagee is required to verify the
identity of a mortgagor before lodging a mortgage under the RPA. In
this regard, a mortgagee must take reasonable steps to ensure that
the person who signs the mortgage (or on whose behalf the mortgage
is signed) as mortgagor is the same person who is, or is to become,
the owner of the land that is security for the payment of the debt
to which the mortgage relates.
A mortgagee has taken the necessary reasonable steps if the
mortgagee has complied with the Anti-Money Laundering and
Counter-Terrorism Financing Rules under the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 (Cth)
If the mortgagee has not complied with the Financing Act, the
mortgagee is required to implement a regime whereby relevant
identification of the mortgagor is verified.
Record keeping obligations
A mortgagee is required to keep a written record of the steps
taken by the mortgagee to comply with its obligations under the RPA
and keep copies of the documents obtained to verify identification
for a period of 7 years.
Consequences of failure to confirm identity
The consequences resulting from a failure by a mortgagee to
comply with the new obligations are severe. Consequences may
include a rejection of lodgement of the mortgage by the Land and
Property Management Authority and even a cancellation of the
recording of the mortgage in the register in certain
From 12 December 2011, the OSR requires that all parties liable
to, or exempt from, transfer duty under the Duties Act 1997 (NSW)
provide certain information. The kind of identification that must
be provided is dependent on whether the lodging party is a company
or an individual.
Moving forward, whether acting in the capacity of a witness, for
mortgagees, completing due diligence prior to the release of funds
or submitting relevant instruments for assessment with the OSR, you
should be aware of the obligations and requirements that must be
satisfied in order to ensure that the relevant transaction is
compliant with the new State regimes.
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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