Mortgagor's ID
Lee Jackson, Consultant
Whilst many mortgagees will have had in place procedures for establishing the identity of mortgagors entering into secured documents, new amendments have been made to the Real Property Act and Regulations to clarify the steps which a mortgagee should take to establish the identity of mortgagors and reduce the risk of fraudulent execution of documents.
From 1 November 2011 mortgagees must comply with the new Section 56C which was inserted into the Real Property Act 1900 on 8 June 2011.
The section requires mortgagees to confirm the identity of mortgagors before presenting a mortgage at LPMA for registration. The mortgagee must take “reasonable steps” to ensure that the person that executes the mortgage is the same person who is, or is to become, the registered proprietor of the mortgaged land.
The Real Property Amendment Regulation 2011 now prescribes what constitutes “reasonable steps”. For a natural person a mortgagee must verify the person’s name, person’s date of birth and residential address from an original or certified copy of a primary photographic document or an original or certified copy of a primary non-photographic verification document.
If the mortgagee is signing on behalf of the mortgagor under a power of attorney, the mortgagee must take similar steps in relation to the attorney and the mortgagor.
If the mortgagor is a company, the mortgagee must verify results of an ASIC search of the company made within the previous 30 days, covering such matters as company name, ACN, registered office address, registration status and name of each director and secretary.
Additionally under Section 56C(3) the mortgagee is required to keep a written record of steps taken by the mortgagee to comply with the above requirements for a period seven (7) years from the date of registration of the mortgage. If the mortgagee fails to comply with these provisions, the Registrar General may refuse to register a mortgage and will make a recording in the register to the effect that the mortgagee has failed to comply with Section 56C requirements.
Additionally, if the Registrar General has reason to believe that a mortgage has been fraudulently executed or if the mortgagee had actual or constructive notice that the mortgagor was not the same person as the registered proprietor of land, the Registrar General may cancel the registration.
Lee Jackson
Consultant
T: +61 2 9390 8312
E: lee.jackson@holmanwebb.com.au