From 1 May 2016, NSW has new identity verification rules in real estate transactions.
The NSW Land and Property Information (LPI) has introduced new Conveyancing Rules under section 12E of the Real Property Act which take effect from 1 May 2016.
The new Conveyancing Rules relate, amongst other things, to the requirements for lawyers and conveyancers to verify the identity of their clients and to check that they have authority to deal with the land.
What is the new rule about verifying identity?
Under Rule 4.1.2:
"A Representative must take reasonable steps to verify the identity of:
- Clients: each Client or each of their Client Agents; and
- persons to whom certificates of title are provided:
- any Client or Client Agent, prior to a Representative giving a certificate of title to that Client or Client Agent; and
- where a Representative acts for a mortgagee, any existing mortgagor, former mortgagor or their agent, prior to the Representative giving a certificate of title to that existing mortgagor, former mortgagor or their agent."
How do you verify my identity?
For the purposes of complying with the new conveyancing rules, a legal representative can either:
- apply the Verification of Identity Standard; or
- verify the identity of a person in some other way that constitutes the taking of reasonable steps.
Generally, the Verification of Identity Standard can be applied by a legal representative, its identity agent, or by both in combination.
The Verification of Identity Standard requires a face-to-face interview and production of at least two original identification documents (depending on the nature of those documents).
In the case of a company, the Verification of Identity Standard requires a legal representative to:
- confirm the existence and identity of the body corporate by conducting a search of ASIC's records; and
- take reasonable steps to establish who is authorised to sign or witness the affixing of the seal on behalf of the body corporate; and
- verify the identity of the individual or individuals signing or witnessing the affixing of the seal on behalf of the body corporate as one would for execution by an individual.
In the case of execution by an attorney, the legal representative must also take reasonable steps to establish that the conveyancing transaction is authorised by the power of attorney.
A legal representative may engage an "identity agent" to undertake the verification of identity process on its behalf.
But you already know who I am!
Yes! However, the new conveyancing rules require that this verification of identity process is undertaken. While the LPI does not yet require that certification that the verification of identity process has been undertaken in order to register dealings, we expect that this will follow as it is a requirement in other States. In the meantime, legal representatives are required to keep a copy of the verification of identity for seven years as a document supporting the dealing. The information will be retained securely.
The good news is that once your identity has been verified, it need not be re-verified for a further two years.
What is the rule about authority to deal?
Rules 4.3.2 and 4.3.3 say:
"For each Conveyancing Transaction a Representative must take reasonable steps to verify that its Client is a legal person and has the right to enter into the Conveyancing Transaction.
A mortgagee, or a Representative of a mortgagee, must, for each mortgage, variation of mortgage or transfer of mortgage, take reasonable steps to verify that the mortgagor is a legal person and has the right to enter into the mortgage."
A conveyancing transaction is one which involves one or more parties and the purpose of which is:
- to create, transfer, dispose of, mortgage, charge, lease or deal with in any other way an estate or interest in land, or
- to get something registered, noted or recorded in the titles register, or
- to get the registration, note or record of something in the titles register changed, withdrawn or removed.
The legal representative's obligation to take reasonable steps to verify that its client is a legal person and has the right to enter into the conveyancing transaction is in addition to the verification of identity requirement.
Although the new rules came into effect from 1 May 2016, the Registrar General is allowing a transition period of three months with full compliance required on and from 1 August 2016.