In July this year we issued a Legal Update: New identification requirements for mortgagees and witnesses.
This Legal Update discussed certain proposed changes to the Real Property Act 1900 (NSW) (RPA) and its regulations, which come into effect on 1 November 2011. The proposed changes essentially relate to the introduction of:
- the imposition on mortgagees of additional identification requirements for mortgagors as a pre-requisite to registration of mortgages at Land & Property Information NSW (LPI); and
- a new concept of "eligible" witnesses to any land dealing (including mortgages, transfers and caveats) with an obligation being imposed on the eligible witness to ensure that the witness is properly satisfied that the signatory is, in fact, the person he or she has represented himself/herself to be.
It is incumbent on mortgagees and potential witnesses alike to be aware of, and be prepared for, this imminent change of law.
Brief summary - new mortgagor identification requirements
In summary, if a mortgagee already has a robust compliance program in place pursuant to the Anti-Money Laundering and Counter-Terrorism Financing Rules made under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML Law) and that compliance program will ensure that the relevant identification steps are taken with respect to any mortgagor, then that mortgagee will not need to take any further "reasonable steps" identified in the new regulations.
However, if a mortgagee does not have an appropriate AML Law compliance program in place which includes all relevant mortgagors - who may not necessarily be borrowers, the mortgagee must ensure that it strictly follows the newly legislated "reasonable steps" regime. A mortgagee who fails to do so may find itself faced with a mortgage it cannot register and other sanctions which the Registrar General may decide to impose. The other sanctions include the Registrar General's new power to cancel a registered mortgage if he holds the view that the registered proprietor did not sign a particular mortgage in circumstances where the mortgagee failed to take the prescribed reasonable steps.
The new rules apply not only to mortgages but also transfers of mortgages and to powers of attorney used to sign on behalf of mortgagors.
For further details, please refer back to our July Legal Update.
Brief summary - new witness obligations
Eligible witnesses must, in addition to existing requirements for acceptable witnesses, either have known the relevant document signatory for more than 12 months or must take the reasonable steps which the new regulations separately prescribe in respect of witnesses. Failure to comply may result in substantial fines for the witness.
For further details, please refer back to our July Legal Update, the link for which is set out above.
New certificate of correctness provision in RPA dealings
Dealing forms under the RPA are being universally amended to incorporate the new required form of certificate of correctness. Under the amended forms, witnesses will be required to certify that they are "eligible" witnesses and that the person whose signature they are attesting signed the document in the presence of the witness.
At the date of publication of this Legal Update the new forms had not been published on LPI's website. However, LPI have indicated that forms containing the current witness attestation provision in the execution clause will be accepted for lodgment until 1 May 2012. Regardless of the form used, however, the new eligible witness requirements will apply in relation to all mortgages executed after 1 November 2011.
Clause 19 of the new Regulation makes it clear that the new laws with respect to mortgagor identification and eligible witnesses are not intended to apply in relation to any mortgage or other relevant dealing executed before 1 November 2011. LPI has confirmed that the "execution" referred to is the signing by the mortgagor. This means that the new laws will not apply to any mortgage signed by the mortgagor(s) before 1 November 2011 (even though the mortgagee may not sign that mortgage until after that date). While these requirements apply from 1 November 2011, the temporary dealing forms concession referred to above helps to alleviate possible harsh results in the transitional period.