Tasmania is moving towards a system where physical Certificates of Title (Title) will no longer be used. Instead, the electronic register will be the official record of who owns and has interests in property.
Using an electronic register will increase the efficiency and security of registered property dealings, resulting in faster and safer registrations. For example, a property transfer will no longer need to be physically delivered to the Land Titles Office for registration. Instead, an online conveyancing platform will automatically lodge the Transfer with the Land Titles Office immediately.
Moving to an electronic system will do away with some informal practices that used to give people a level of control over property.
Under the current paper system, holding the physical Title can give practical control, because it is needed to register most dealings. This sometimes happens with unregistered mortgage arrangements.
Unregistered Mortgages
An unregistered mortgage is a mortgage that has been granted by a landowner that has not been registered on the Title. An unregistered mortgage records an agreement between the borrower and lender, but because it is not registered on the Title, it does not give the lender the same level of protection as a registered mortgage. Unregistered mortgages often arise where there has been a private loan such as between family members or related entities.
In the past, holding onto the physical Title provided a lender some protection because the borrower generally could not sell or deal with the property without the lender’s involvement.
What Changes Under the Electronic System
When all Titles are electronic, holding a physical Title will have no real value. Unregistered mortgages will become much riskier because they no longer give lenders physical control over the Title. A borrower may be able to sell or deal with the property without an unregistered lender’s knowledge or consent given the mortgage is not registered on the Title.
How to Protect Your Position
The best way to protect your interests is to register a mortgage on the Title if your loan agreement allows it, or to register a caveat to protect the lender’s interest.
A registered mortgage or caveat will appear on the Title and carry through to the electronic system. This ensures your interest in the property is protected and prevents the property from being sold or dealt with without giving you an opportunity to recover the debt.
If you need help understanding how these changes affect you, or would like advice about protecting your position as a lender, please get in touch with our Property Law Team.