Victoria's proposed amendments to the Transfer of Land Act
The Transfer of Land Amendment Bill 2014 (Vic) was introduced
into the Legislative Assembly on 5 August 2014, and if passed, will
amend the Transfer of Land Act 1958 (Vic).
One of the proposed amendments is to require a mortgagee to
properly verify a mortgagor by taking "reasonable steps",
bringing Victoria into line with the requirements in Queensland,
New South Wales, South Australia, and Western Australia.
What does this mean for lenders?
If you are a lender and taking a mortgage or transfer of
mortgage over real property in Queensland, New South Wales, South
Australia, Western Australia or Victoria (if the Bill is passed),
you need to take certain steps to verify the identity of the
mortgagor. If you fail do to this, you will not obtain the benefit
of indefeasibility in respect of the mortgage and the mortgage may
be held to be void.
The identity requirements vary slightly between the states. For
example, in Queensland you are required to take "reasonable
steps". The "reasonable steps" requirement is
equivalent of the best practices currently employed by reputable
mortgagees, such as the satisfaction of a 100 point identification
verification. Regardless of these statutory requirements, lenders
may already have appropriate systems in place to comply with
anti-money laundering and know your client requirements.
Why is there an onus on the mortgagee?
The reason put forward in the Victorian Bill's second
reading speech was that there have been instances where a
fraudulent mortgage was registered as a result of a financial
institution neglecting to adequately verify the party with whom it
was transacting (and thereby contributing to the fraud).
What should lenders be doing to avoid their mortgage being held
to be void?
be aware of the particular verification requirements in each
perform the verification requirements diligently; and
maintain a record of the steps taken.
If the mortgage is not in Queensland, New South Wales, South
Australia, Western Australia or Victoria, it would be prudent to
adopt rigorous verification requirements as soon as possible to
mitigate the risk of identity fraud.
It will also mean that you will have systems in place ahead of
time if Tasmania and the territories go ahead and introduce
requirements similar to those in Queensland, New South Wales, South
Australia, Victoria and Western Australia.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
Persons listed may not be admitted in all states and
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