Australia: Mortgagor identification commences in NSW
regulation and compliance update

From 1 November 2011, there will be new requirements in NSW for mortgagees to identify mortgagors and new rules for witnessing most Torrens Title dealings. These are two new separate and distinct requirements.

Identifying mortgagors - NSW

• The mortgagee is obliged to take reasonable steps to verify the identity of the mortgagor.

• The regulations prescribe that a mortgagee can do this either by:

• Records must be kept for a period of seven years.

• The Registrar General can ask mortgagees to produce their records for inspection.

• The Registrar General may cancel a mortgage if the RG considers that:

a. the execution involved fraud; and

b. the mortgagee failed to comply with the identification requirements; or

c. the mortgagee had actual or constructive notice of the fraud.

• A transferee of a mortgage is subject to the same restrictions (ie there is a need to re-identify when there is a transfer or mortgage registered – does not impact on equitable assignments).

These requirements are similar but not the same as the Queensland requirements. However, identification under a mortgagee's AML/CTF Program within a reasonable time of the mortgage being signed should satisfy the identification requirements in NSW and Queensland.

Qualification of witness - NSW

The requirements for witnessing documents are quite separate from the requirement to identify mortgagors discussed in the last heading.

Currently witnesses for real property dealings in NSW need only be an adult of at least 18 years of age.

In addition to the requirement to identify mortgagors described above, in respect of most dealings (not just mortgages) dated on or after 1 November 2011, the witness must be an eligible witness who:

• is at least 18 years old;

• is not a party to the dealing;

• has known the person for more than 12 months; or

• has taken reasonable steps to ensure the identity of that person.

Witnesses who follow the procedures set out in the regulations will be deemed to have taken reasonable steps.

For completeness, we note that in Queensland witnesses must be a prescribed 'witnessing officer'.

Action steps - NSW

1. AML/CTF identification of borrowers remains unchanged.

2. If all mortgagors have been identified by AML/CTF Procedures, so long as the mortgage is signed within, say, two months, it will be reasonable for a mortgagee to rely on that identification. Mortgagees who do not have an AML/CTF Program should identify the mortgagors using the procedures specified in the regulations.

3. Mortgages dated on or after 1 November 2011 must be witnessed by an eligible witness. Appropriate instructions will need to be sent with mortgage documents issued from mid September 2011. The NSW Land and Property Information office may amend prescribed forms to provide information about the witness.

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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.