Australia: Good things happen when you get your priorities right – NSW gets priority notices for electronic conveyancing

A priority notice provides an inexpensive and simple way of preventing new legal interests in the land being registered prior to registration of the relevant dealing on the title for land.

If you've engaged in any conveyancing in NSW recently, you will have noticed the extra layers of security information we must collect to meet NSW's Verification Of Identity regulations. In a further move to protect those parties dealing in land and fight real estate fraud, a new document you will be hearing about when you next try to buy, sell or otherwise transfer property is a priority notice.

The Real Property Amendment (Electronic Conveyancing) Act 2015 introduces a number of significant amendments to the Real Property Act 1900 (RPA) as part of the national transition to electronic conveyancing.

New part 7B of the RPA will come into effect on 1 October 2016 enabling a person who intends to lodge a dealing, to give effect to a legal or equitable interest in land, to lodge a priority notice. A priority notice will only be available for electronic lodgement through the PEXA platform. It is anticipated that PEXA will be able to accept lodgement and withdrawal of priority notices by 31 October 2016.

What is a priority notice?

Priority notices are designed to remove the risk of the registration gap between settlement of a transaction and registration and also to reserve a title for a forthcoming settlement.

A priority notice, once lodged, alerts all interested parties who search the Register to the fact that the lodgement of a conveyancing transaction is imminent.

Duration of effectiveness

A priority notice is effective for 60 days. This period can be extended (once only) for an additional 30 days if the application for extension is made while the priority notice is in force.

The priority notice will be removed from title after it expires and will have no further effect. Any subsequent priority notice lodged by the same party will have effect only from its lodgement date and will not be connected in any way to former priority notices.

Can I still deal with the land if a priority notice has been lodged?

Our answer to this is "maybe".

The Registrar General must not register any dealing or any plan while a priority notice has effect with respect to a proposed dealing to give effect to an entitlement to an estate or interest in land, without the consent of the person who lodged the priority notice.

In practical terms, a document can still be lodged notwithstanding the presence of the priority notice, but it will sit as unregistered until such a time as the priority notice expires or otherwise lapses.

However registration of the following dealings would not be prevented by a priority notice:

  • a dealing in registrable form that was lodged before the priority notice;
  • the dealing or dealings to which the priority notice relates;
  • a caveat or the withdrawal or lapsing of a caveat;
  • a vesting or dealing effected in accordance with an Order of a Court or a provision of law;
  • an application made under section 93 by an executor, administrator trustee in respect of the estate or interest of a deceased registered proprietor;
  • an application made under section 12 of the Trustee Act 1925 or an order of a court or dealing which, in the opinion of the Registrar General, effects or evidences a replacement of existing trustees or the appointment of new or additional trustees;
  • an application made under section 101 in relation to the registration of a survivor of joint proprietors;
  • a dealing effected by a mortgagee, chargee or covenant charge in the exercise of a power of sale or other power or conferred right where the mortgage, charge or covenant charge was recorded and lodged in registrable form before the lodgement of the priority notice; and
  • a dealing effected by a lessee pursuant to a conferred right where the lease was recorded or lodged in registrable form before lodgement of the priority notice.

Should I lodge a caveat or a priority notice?

Unlike a caveat, there are no restrictions on lodging a further priority notice when the earlier one lapses unless the Supreme Court makes an order to this effect. A further difference is that a registered owner of the property is not notified of the lodgement of a priority notice unlike a caveat.

In deciding whether to register a caveat or a priority notice it is prudent to consider the settlement period given that a priority notice will lapse in 90 days and the caveat will only lapse in accordance with the lapsing procedures set out in section 74J of the RPA.

Priority notices do not replace caveats and cover a narrower field of interests i.e. interests which arise pursuant to dealings intended to be registered. There is nothing in the RPA which prevents a purchaser or incoming mortgagee from lodging both a caveat and a priority notice.

What happens when another party has lodged a priority notice?

Where competing priority notices are recorded by different parties claiming interest in the same land then it is anticipated that priority would be determined by lodgement order of the priority notices.

Do other jurisdictions have priority notices?

Priority Notices can currently be lodged in Tasmania, Queensland and South Australia. Other jurisdictions are now considering implementation of priority notices.

Cessation of priority notices

The person who lodged the priority notice may subsequently withdraw it.

A person with an interest in the land in relation to which a priority notice is in force may make an application to the Registrar General to have the priority notice cancelled. If satisfied that the priority notice purports to protect the priority of an agreement that is unlikely to be recorded within 90 days of the priority notice being lodged, the Registrar General may cancel the priority notice.

When considering the priority notice, the Registrar General must give the person who lodged the priority notice written notice of the application and give them at least 10 days to respond.

A person who lodges a priority notice without reasonable cause or fails to withdraw a priority notice without reasonable cause may be liable to pay compensation to any person who sustains pecuniary loss attributed to the lodgement or refusal of withdrawal.

Should I lodge a priority notice?

Although the RPA does not compel lodgement of a priority notice, we expect that their use will come to be regarded as prudent, particularly given the delays which sometimes occur with banks registering their borrowers' transfers Maintaining a priority notice until the relevant dealing is registered on the title for the subject land may well prove to be a beneficial safeguard against new parties acquiring legal interest in the land and frustrating registration of the dealing the subject of a priority notice.

A priority notice provides an inexpensive and simple way of preventing new legal interests in the land being registered prior to registration of the relevant dealing on the title for land.

From an anti-fraud perspective, priority notices will flag impending transfers more systematically, enabling fraudulent activity to be prevented more easily.

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 territories.

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