In NSW, a mortgagee and a receiver, owes a statutory duty to a mortgagor to ensure that land or other property is sold by them for market value or, if the property does not have a market value, for the best price that is reasonable obtainable in the circumstances. The duty is codified by:

  • section 420A of the Corporations Act - for property owned by a company;
  • section 111A of the Conveyancing Act - for land owned by a company or an individual; and
  • section 131 of the PPSA - for personal property.

When considering compliance with the duty, the primary focus of the courts has been on the process undertaken by mortgagees and receivers, when selling property. 

We have highlighted below some of the key issues that mortgagees need to consider to ensure that they discharge their statutory obligations when exercising power of sale.

  1. The agent – ensure that the agent you retain has the appropriate experienceto sell the property. This includes being familiar with the type of property aswell as the location
  2. Advertising and Marketing – obtain the agent’s advice as to where, howand how long the property should be advertised.

Generally, advertisements should include a combination of sign boards, print advertisements and internet listing.

If the property is unique, you may consider additional forms of advertising such as specialist industry or trade publications.

Advertisements of the property should contain all material details and should be conducted for a reasonable period prior to auction or sale to ensure that the property comes to the attention of all potential purchasers.

  1. Expert advice – obtain expert advice in relation to any unique characteristics of the property and follow the advice of experts as to stepsthat can be taken to maximise the sale price of the property.
  2. Valuation – obtain an independent valuation of the market value of theproperty. The valuer should have regard to the particulars of the property in question, as well as comparable recent sales.
  3. Development potential – Where possible disclose any developmentapplication lodged by, or on behalf of the mortgagor, to potential purchasers.
  4. Supervision – appointing an agent to handle the sale does not mean thatyou can leave the sale to the agent.

A mortgagee is directly responsible for the agent’s conduct. Ensure that you agent refers all offers to you for consideration and exhausts negotiations with all potential purchasers before concluding any sale.

  1. Public Auction, Expressions of Interest, Tender or Private Treaty –Determine which method of sale is best to ensure market value is obtainedfor the particular property involved.

Public Auction is generally, but not always, the most prudent method of sale to ensure market value is obtained.

Response to potential breach of duty to sell for market value

Circumstances may arise, where the sale price offered by a potential purchaser is on the condition that the property is not marketed. The price offered may be greater than the Bank’s valuation.

If the Bank were to proceed, a breach of s420A may occur as arguably, no steps have been taken to sell the property for the “market value”.

In anticipation of a potential breach of s420A, the mortgagee could take steps to mitigate the prospects of any complaint by obtaining the consent to the sale of relevant parties, including the mortgagor, any subsequent mortgagee, any caveator and any guarantor.


Every mortgagee sale, or receiver sale is the sale of unique property.

Accordingly, the steps required to discharge the mortgagee’s duty will be unique to the circumstances of each sale.

For this reason, it is important that tailored advice is obtained in relation to each sale.

This paper is not a comprehensive guide. Rather, it highlights some of the key issues mortgagees need to consider in ensuring that they discharge their statutory obligations when exercising power of sale.