In brief - Identify borrowers with appropriate documents and keep records for seven years
Amendments to the Real Property Regulation 2008 (NSW) were introduced in July 2012 and specify what constitutes "reasonable steps" to identify borrowers both for natural persons and for corporations.
Consequences of failing to take reasonable steps
It is now more important than ever for mortgagees (the persons taking mortgage security) to take reasonable steps to ensure the person executing the mortgage, the mortgagor is, or will become, the registered proprietor of the mortgaged land.
Your mortgage may be useless if you do not keep records to show that reasonable steps were taken.
This is because the Registrar may refuse to register your mortgage. If the mortgage is already registered, it could be cancelled where execution involved fraud or a notation may be made on title (Section 56C(5) and (6)).
What constitutes reasonable steps to confirm the borrower’s identity?
You can be certain that you have taken reasonable steps if you have either:
- taken the steps prescribed by the Real Property Regulation 2008 (NSW) , Part 3A and summarised below, or
- for banks, building societies and credit unions dealing with borrower customers and guarantors, you have already complied with Commonwealth Anti Money Laundering and Counter Terrorism identification rules.
Written records of compliance need to be kept for seven years from registration (see section 56C(3)). These provisions apply equally to a person taking an assignment of mortgage (see section 56C(8)).
Your lawyer can create and keep the necessary records for you.
Reasonable steps to identify borrowers who are natural persons
- Obtain full name, date of birth, residential address
- Verify with a primary photographic identification document (ID) – or primary non-photo ID and secondary ID
- The document must be legible, unaltered, with no apparent discrepancy unless reasonably explained and supported (eg recent marriage / change of name)
- A photo must be a "true likeness"
- The document must not have expired – other than an Australian passport that has been expired for less than two years
- All documents must be originals or copies certified by a person authorised to take and receive statutory declarations under section 21 of the Oaths Act 1900
- There is no requirement for verification in a face to face meeting
Reasonable steps to identify borrowers which are corporations
- For a body corporate, you need to collect from the Australian Securities and Investments Commission (ASIC): the registered name, registered office address, principal place of business address in Australia (if any), Australian Company Number (ACN) or Australian Registered Body Number (ARBN), registration status and the name of each director and secretary.
- For an incorporated association or co-operative, you need to collect the same information from the relevant registration body, but in lieu of director and secretary, you need the name of the chairperson, secretary and treasurer and the name and address of the public officer.
- All information must be verified by an ASIC or registration body search made within the previous 30 days. You need to be "reasonably satisfied" that the document is legible, unaltered, with no apparent discrepancy
Reasonable steps to verify the attorney
- Verify both the mortgagor (whether as an individual or a corporation) and the attorney (whether as an individual or a corporation), using the steps described above
- Verify that the execution of the mortgage was authorised by the power of attorney
No apparent discrepancy between borrower's information and ID documents
The mortgagee must resolve any apparent discrepancy between the mortgagor’s personal information and identification documents. Mere mechanical compliance is not sufficient.
Here are some examples of discrepancies that will need further explanation:
- the mortgagor claims to be the registered proprietor but the name recorded on their ID is not exactly the same as that on a title search
- the mortgagor appears to be younger or older than the current registered proprietor, as indicated by any information available
Keeping records verifying that you established the borrower's identity
Records can include any written documentation, copies of identification sighted, or driver's licence and passport numbers. These records must be kept for seven years and be produced on request to the Registrar General.