In brief - New South Wales Land Registry Services has abolished Certificates of Title (CTs) and the control of the right to deal (CoRD) framework, and has progressed NSW to 100% electronic lodgement of land dealings, following SA, Queensland and ACT.
These changes, which took effect from 11 October 2021, were brought in by the Real Property Amendment (Certificate of Title Act) 2021 in an effort to:
increase the efficiency and cost-effectiveness of conveyancing;
reduce fraud and ensure a greater reliance on the security of the Torrens Register for property owners; and
reduce the prevalence of mistakes and errors that occur in paper lodgement.
All existing CTs will now be cancelled and will no longer be issued, and banks will no longer be required to give CoRD consent to dealings. There are, however, a few dealings that still require the express consent of mortgagees, such as lease dealings, releases of easements and positive covenants etc.
Impact on lenders
The new changes will have a significant, and possibly a burdensome, impact on lenders.
Borrowers are no longer required to provide the CoRD consent of first registered mortgagees on title to subsequent mortgage registrations in PEXA, however, there is likely to be a contractual obligation under any financing arrangements.
Any issues in relation to the registration of subsequent mortgages where there is already an existing mortgage on title is no longer monitored by the LRS, and has become a matter of contractual compliance between the borrower and an existing mortgagee.
Lenders therefore face the burden of now having to monitor secured properties for any future dealings being registered without their consent or knowledge. This is likely to increase the importance of ensuring there are adequate negative pledge undertakings in place in financing arrangements and that compliance with this clause is maintained for the duration of the loan.
We recommend that lenders review and update their negative pledge clauses to ensure they adequately cover the changes introduced by the new legislation, and implement a system of regular title search checks to monitor borrower compliance.
Will lenders be notified of any registrations?
Lenders should also be aware that they will not necessarily be notified of any new registrations on the title of real property in NSW used as security. The new legislation does require an Information Notice to be issued on completion of the transaction, which includes the details of the new registered dealing.
This Information Notice will only be provided to the lodging party to the transaction. Therefore, a first-registered mortgagee on title may not receive any notice of the registration of subsequent dealings. This further stresses the importance of having a system of regular title search verifications.
With the abolishment of Certificates of Title, how can you protect your interest?
As CTs have been made redundant, the Torrens Title Register is now currently the sole source of verification for an interest in a property, and a title search is now sufficient evidence of such an interest. Therefore, the requirement to retain or store CTs (and superseded CTs after settlements) is no longer in effect.
Abolishing CTs also means that any equitable mortgages or liens secured by possession of a CT is now not secure.
Any lenders and financiers relying on a CT to secure such equitable interests should immediately seek to properly register their interest, as physical CTs are no longer considered relevant for this purpose in NSW.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.