Australia: Pri­or­i­ty notices in NSW: Pru­dent or impractical?

Last Updated: 13 April 2019
Article by Daniel Kentwell and Carly Howard

With the deadline for mandatory e-conveyancing fast approaching, conveyancing in New South Wales has unequivocally entered the digital age. 

And while the change from ​'paper' conveyancing to online platforms gives practitioners the opportunity to streamline their services and potentially pass on costs savings to clients, it also creates new potential problems – one of the most pronounced of which is fraud. 

It is thought that priority notices will be a useful tool in the responsible e-conveyancer's armoury – if genuine land transactions are flagged by a priority notice, it is hoped that identification of potentially fraudulent transactions will be quicker and easier. 

But the actual legal and practical effects of priority notices have left many scratching their heads. What are they? And how and why should they be used?

This article aims to answer some of the most common questions about priority notices.

What is a priority notice?

Priority notices were introduced in November 2016 under the Real Property Amendment (Electronic Conveyancing) Act 2015.

A priority notice is a form of land dealing which, once registered on title:

  • acts as a notice to the public that someone intends to lodge a dealing on a relevant title (for example, a transfer, lease or mortgage); and 
  • temporarily (i.e. for the duration of the priority notice) prevents the registration of other dealings in order to preserve the priority-on-title of the dealing covered by the priority notice. Any subsequent dealings are noted on title as ​'unregistered dealings' until the priority notice is withdrawn or lapses. 

Thus, for example, if you are intending to lodge a transfer or mortgage, you can register a priority notice to hold the transferee's or mortgagee's place on title up until settlement.

It has been suggested that the priority notice replaces what used to be known in New South Wales as a ​'settlement notice'. However, we consider the priority notice to be more comparable to a caveat.

Lodgement, duration and cost 

Priority notices must be lodged online via PEXA, but they can apply to any transaction — paper or electronic.

A priority notice has an initial priority period of 60 days from the date of registration and can be extended once, for a further 30-day period. However, a priority notice can also be withdrawn before the end of the 60-day (or extended 30-day) period.

Priority notices are cheap to register (approx. $48 for single or multiple titles) and to extend (approx. $21). The fee for withdrawing a priority notice is approximately $25.

Pros and cons

Priority notices have some distinct advantages and disadvantages. 

In their favour:

  • they are cheap
  • they are quick and easy to lodge
  • a caveatable interest is not needed in order to register a priority notice – all that is required is that you are a party to a land dealing
  • a single priority notice can remain on title for a reasonable time (60 to 90 days), and
  • sequential priority notices can be lodged without limit in relation to the same land dealing (ie when a previous priority notice lapses).

On the other hand:

  • unlike a caveat, a priority notice is time limited and does lapse, and
  • priority notices do not prevent registration of all subsequent dealings – for example, a caveat is not subject to a priority notice and there can also be competing priority notices.

Priority notices vs caveats

We consider the automatic lapsing attribute to be one of the main pitfalls of a priority notice. As stated above, when a priority notice is registered, subsequent dealings lodged for registration are noted on title as ​'unregistered dealings' until the priority notice dealing is registered or the priority notice lapses or is withdrawn. The ability to lodge consecutive priority notices for the same dealing (if the dealing is not registered within the initial priority period), does not appear to prevent an unregistered dealing noted on title (if in registrable form) from registering immediately on the lapse of the priority notice and before a second priority notice can be lodged. This is clearly unsatisfactory if the dealing for which you are trying to preserve priority cannot be registered within the priority notice period for whatever reason. 

So, while many have pondered whether caveats will lose their relevance with the introduction of the priority notice, we believe that, if a there is a caveatable interest, it may well be more prudent to lodge a caveat than a priority notice – particularly, if the registration date of the dealing cannot be predicted with certainty. 

The beauty of a caveat is that it remains on title indefinitely, preventing virtually all dealing with the title until it is either withdrawn (for example, when payment is made to the caveator) or is lapsed by the owner or another interested person seeking its removal. Given that achieving lapsing can be complex (and even involve court proceedings if the caveator defends their caveatable interest), a caveat gives strong protection for the priority of a proposed dealing. 

Even though the priority notice and caveat have distinct purposes — the priority notice merely to preserve the priority of a specific dealing that is to be lodged for registration at a later time and the caveat to act as a form of security and a warning to third parties that the caveator has an equitable or legal interest in the land – where a caveatable interest exists, either can be used to protect the priority of an impending dealing. In our view, where that caveatable interest exists, registering a caveat is the safer bet (albeit that it costs $100 more). 

Conclusion

Although priority notices are, undeniably, a quick and cheap tool that can be used to preserve a future dealing's priority on title, one must also carefully consider whether:

  • the relevant dealing will, in fact, be registered within the priority notice period, and
  • if the circumstances permit, whether a caveat should be lodged instead.

Perhaps these drawbacks explain why their uptake in New South Wales has been slow. 

For further information please contact:

Daniel Kentwell, Senior Associate
Phone: + 61 2 9233 5544
Email: dck@swaab.com.au

Carly Howard, Solicitor

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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