Identification guide for New South Wales
Fraud in land dealings has long been an issue in New South Wales. Now the legislature is taking a preventative approach to try to minimise the incidence of fraud.
Whether or not these initiatives accomplish a reduction of fraudulent property related transactions is to be seen.
Land transactions – section 117
From 1 November 2011, section 117(1)(b)(i) of Real Property Act 1900 (NSW) (RPA) requires that a witness certify that the witness is an “eligible witness”.
Section 117(4) of the RPA provides that a witness is an “eligible witness” if the person:
- is at least 18 years of age;
- is not a party to the transaction; and
- has known the signatory whose execution they are witnessing for more than 12 month or has taken reasonable steps to ensure the identity of that person.
The Real Property Act Regulations 2008 (NSW) prescribes the reasonable steps to be taken by a witness to ensure the identity of a signatory of a land dealing.
If the witness has known the signatory whose signature they are witnessing for more than 12 months, that witness need not take further steps to verify the identification of the signatory.
In essence, a witness will have taken the relevant reasonable steps if the witness has sighted prescribed identification documents.
The Registrar General may reject or refuse to accept the land dealing for lodgement if the land dealing does not bear the appropriate certification.
Record keeping obligations
There is no obligation on a person who is a witness to a land dealing to keep any record of the steps taken to verify identification, although we recommend that the witness retain a record of the steps.
Mortgage transactions – section 56C
Confirmation of identity of mortgagor
From 1 November 2011, a mortgagee is required to verify the identity of a mortgagor before lodging a mortgage under the RPA. In this regard, a mortgagee must take reasonable steps to ensure that the person who signs the mortgage (or on whose behalf the mortgage is signed) as mortgagor is the same person who is, or is to become, the owner of the land that is security for the payment of the debt to which the mortgage relates.
A mortgagee has taken the necessary reasonable steps if the mortgagee has complied with the Anti-Money Laundering and Counter-Terrorism Financing Rules under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (Financing Act).
If the mortgagee has not complied with the Financing Act, the mortgagee is required to implement a régime whereby relevant identification of the mortgagor is verified.
Record keeping obligations
A mortgagee is required to keep a written record of the steps taken by the mortgagee to comply with its obligations under the RPA and keep copies of the documents obtained to verify identification for a period of 7 years.
Consequences of failure to confirm identity
The consequences resulting from a failure by a mortgagee to comply with the new obligations are severe. Consequences may include a rejection of lodgement of the mortgage by the Land and Property Management Authority and even a cancellation of the recording of the mortgage in the register in certain circumstances.
From 12 December 2011, the OSR requires that all parties liable to, or exempt from, transfer duty under the Duties Act 1997 (NSW) provide certain information. The kind of identification that must be provided is dependent on whether the lodging party is a company or an individual.
Moving forward, whether acting in the capacity of a witness, for mortgagees, completing due diligence prior to the release of funds or submitting relevant instruments for assessment with the OSR, you should be aware of the obligations and requirements that must be satisfied in order to ensure that the relevant transaction is compliant with the new State regimes.