Amendments to the Victorian real property legislation now bring Victoria in line with Queensland, New South Wales, South Australia and Western Australia in relation to the statutory requirement to identify borrowers.
The Transfer of Land Amendment Act 2014 (Vic) came into effect on 24 September 2014, requiring lenders to take ‘reasonable steps’ to verify the identity of borrowers before executing a mortgage or variation of mortgage.
Lenders can comply with the new requirements by adhering to the standards set by the Registrar (none of which have yet been published), or the Model Participation Rules within the meaning of the Electronic Conveyancing National Law (Victoria).
The requirements, similarly to the other Australian states, oblige lenders to take reasonable steps to ensure the borrower is indeed, or will become, the registered proprietor of the security property. If this is not done, the Registrar of Titles may cancel registration of the mortgage or variation of mortgage. The amendments also impose these requirements on lenders taking a transfer of mortgage.
Failure to adhere to the new requirements will result in a void mortgage and the lender losing indefeasibility of title in the event of a fraud.
Further amendments provide that the maximum indemnity lenders can now recover in the case of a fraudulent mortgage where the identification requirements have been complied with is the principal combined with an interest rate that must not exceed the Bank Accepted Bills rate (within the meaning of the Taxation (Interest on Overpayments) Act 1986 (Vic)).
Bransgroves recommends that lenders use a set of premium mortgage documents, such as our own suite which we licence, and employ rigorous identification requirements to ensure their security is protected.
Bransgroves always accepts responsibility for ensuring reasonable steps are taken to identify the borrower and warrants that indefeasible title will be obtained when certifying title and contract out of the proportionate liability regimes.
This transfers the risk from your balance sheet to our professional indemnity insurance.