Mortgagor verification requirements in force in Victoria

Since 24 September 2014 a mortgagee in Victoria has been required to take reasonable steps to verify the authority and identity of a person executing a mortgage as mortgagor to ensure that person is the same person who is the registered proprietor of the land that is the security for the payment of the debt. See: s.87A(1) of the Transfer of Land Act 1958.

If the Registrar is satisfied that the mortgagee did not take reasonable steps and the registered proprietor of the land did not grant the mortgage the Registrar may:

(a)   if the mortgage has not been registered, refuse to register the mortgage; or

(b)   if the mortgage has been registered remove the mortgage from the Register.

See: s.878A(3)

If the mortgage is removed from the Register the mortgagee no longer has an indefeasible interest in the mortgaged land and the mortgage is void. See: s.84A(5).

A mortgagee is considered to have taken reasonable steps taken to have to verify the authority and identity of a person executing a mortgage if it has taken steps consistent with any verification of identity and authority requirements:

(i)            determined by the Registrar under s.106A; or

(ii)          set out in the ‘participation rules’ within the meaning of Electronic Conveyancing National Law (Vic).

The Registrar has not yet made a determination under s.106A.

The participation rules refer to a face to face interview in the case of an individual and the sighting of identification documents such as a passport, birth certificate, Medicare card, drivers licence. See: schedule 8 “Verification of Identity Standard”. Where the mortgagor is a company confirmation of the existence and identity of the body corporation by a search of ASIC’s records must be undertaken together with reasonable steps to establish who is authorized to sign or witness the affixing of the common. The identity of the person affixing the common seal must also be verified. There are also provisions for the establishing the identify and powers of attorneys acting on behalf of mortgagors.

Mortgagees should establish procedures to ensure that they can comply with the new procedures also maintain records that prove they have complied with the new procedures.